Businesses, employers, and SBA lenders have been waiting for further clarification and added relief regarding the SBA Paycheck Protection Program (PPP). The new Paycheck Protection Program Flexibility Act of 2020 (PPPFA) provides some of the much needed guidance. Here is a summary of the bill.
These provisions are retroactive to the CARES Act enactment (signed into law June 5, 2020), unless otherwise noted.
Longer maturity date. Loans now have a maturity of 5 years for any unforgiven portion. PPP loans with the prior maturity date of 2 years may be modified.
“Covered Period” is extended. Borrowers now have 24 weeks from time of loan disbursement or till 12/31/2020 to use the proceeds – whichever comes first. Loans prior to the PPPFA, can still elect to use the 8-week period. Borrowers can also still elect to use the “alternative payroll period” by selecting for the new 24-week period to begin on the first day of the first payroll period after receiving the loan proceeds.
Allocation of required payroll costs decreased from 75% to 60% of the covered loan amount for loan forgiveness. The remaining 40% can still be used for qualifying non-payroll expenses (rent, mortgage interest, utilities, etc.). Partial forgiveness is still available if a borrower uses less than 60% for payroll costs during the forgiveness covered period.
FTE rehire date extended and relief. Employers now have until 12/31/2020 to restore their workforce to 02/15/2020 numbers. In addition, PPPFA provides additional forgiveness relief for those who are unable to restore their workforce in the case of inability to rehire individuals, hire replacement individuals, or ability to restore business activity due to government or regulatory compliance. Must be able to demonstrate inability to rehire/hire and return to same level of business as 02/15/2020 by providing documentation for the forgiveness relief.
Deferment of 6.2% OASDI tax okay even after receiving PPP loan forgiveness. Employers can defer payment of their 2020 OASDI portion of payroll tax for period beginning 03/27/2020 through 12/31/2020, regardless of loan forgiveness. Half of the deferred amount is still due on 12/31/2021 and the other half due on 12/31/2022.
The application date has been extended to August 8, 2020. (this was extended on July 3rd)
We expect there will be more guidance coming for more clarification regarding forgiveness. For the complete PPPFA bill, click HERE, or visit our COVID-19 Resources page for additional SBA and Treasury resources (as they become available).