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Payroll Protection Plan Flexibility Act of 2020

June 5, 2020

By Robert J. Waine, Esquire

On June 5, 2020, the Payroll Protection Plan Flexibility Act of 2020 (the “PPP Flexibility Act”) was signed into law.  The PPP Flexibility Act makes several changes to the PPP loan program to provide businesses more flexibility in using the loan proceeds and in seeking loan forgiveness.  The main changes to the PPP loan program are:

  • For new loans, borrowers will have at least five years to repay any amounts due after loan forgiveness, rather than the two years required under the SBA rules.
  • Payment of principal and interest will be deferred until the lender receives payment from the SBA of the forgiven loan amount, rather than limited to six months after receiving the loan.
  • The loan forgiveness period will be 24 weeks or until December 31, 2020, whichever is earlier, rather than 8 weeks.
  • Up to 40% non-payroll costs can be forgiven, provided at least 60% of the PPP loan proceeds are spent on payroll costs.
  • The date by which an employer has to rehire employees so as to not have a reduction in loan forgiveness is extended to December 31, 2020, and there is a good faith exception if the employer is unable to rehire employees in certain circumstances.
  • Recipients of PPP loans that are forgiven will be able to defer payment of payroll taxes under the CARES Act.

Although in some ways the PPP Flexibility Act seeks to correct some of the perceived short-comings of the PPP loan program, it creates additional complexity, particularly for borrowers who have already received their PPP loans.  Any borrower who received a PPP loan before the new law goes into effect can elect to apply the 8-week loan forgiveness period.  In addition, a borrower’s loan documentation might be inconsistent with the PPP Flexibility Act, such as the five year repayment period, and will have to be renegotiated.

Now that the President has signed the PPP Flexibility Act, we assume the SBA will be issuing new guidance and rules to implement its provisions.  The attorneys at Rothman Gordon, P.C., are closely following the ever-evolving requirements related to the Cares Act and PPP loans.  We are here to assist to navigate these difficult times.  If you need any assistance please contact us online or call (412) 338-1100.

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