Congress Passes PPP Flexibility Act, Extending Covered Period from 8 Weeks to 24 Weeks
On June 3, 2020, the United States Senate voted to approve the Payroll Protection Program Flexibility Act (the “Act”), which was passed by the United States House of Representatives last week. The President is expected to sign the legislation today.
The Act provides flexibility to borrowers under the Small Business Administration’s (“SBA”) Payroll Protection Program (“PPP”) created pursuant to the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The Act makes the following changes to the PPP:
- Borrowers now have 24 weeks, increased from 8 weeks, to expend their loan proceeds and qualify for forgiveness (in no case to extend past December 31, 2020). A borrower can still elect to use its original 8-week period.
- Borrowers need only spend 60% of their loan amount, down from 75%, on “payroll costs.” The remaining 40% of the loan may be spent on eligible “nonpayroll costs.”
- The repayment period for any unforgiven portion of the loan has been increased from 2 years to 5 years.
- Borrowers are now eligible to defer the employer’s share of FICA payroll tax for two years.
- The safe harbor period for rehires has been extended from June 30, 2020 to December 31, 2020.
- Borrowers will not have a reduction in forgiveness due to a reduction in the number of full-time equivalent employees if the borrower (a) cannot rehire the individuals employed on February 15, 2020 and cannot find similarly qualified employees by December 31, 2020 or (b) is unable to restore the borrower’s business activity to the levels in place before February 15, 2020, due to new sanitation, social distancing or other worker or customer safety laws put into place due to COVID-19.
If you have any questions regarding the SBA PPP loans, or other aspects of the CARES Act or PPP Flexibility Act, please contact a Baird Holm LLP attorney.