Paycheck Protection Flexibility Act makes loan forgiveness more borrower friendly
On June 5, 2020, the president signed into law the bipartisan Paycheck Protection Flexibility Act of 2020 (PPFA), which eases rules on how Paycheck Protection Program (PPP) loan funds can be used and extends the forgiveness application deadline from eight weeks from the origination date of the loan to 24 weeks from the origination date or December 31, 2020, whichever is earlier.
This will be welcome news to many PPP borrowers. Prior to the passage of the PPFA, full loan forgiveness was limited to recipients who used all of their funds within eight weeks of the loan date and spent 75% of the funds on payroll costs. In addition to extending the covered period to 24 weeks, the PPFA reduces the required payroll portion of funds to 60% and gives employers until December 31, 2020 (extended from June 30, 2020) to rehire laid-off and furloughed employees. Additionally, borrowers will no longer have their forgiveness amount reduced for a decrease in employee numbers if they can document they could not rehire the individuals who were employees on February 15, 2020, find qualified employees to fill open positions by December 31, 2020, or were unable to restore business operations to February 15, 2020 levels as a result of COVID-19 restrictions.
For borrowers that are unable to receive full loan forgiveness, the PPFA extends the loan maturity period from two years to five years and maintains the 1% interest rate established under the CARES Act. Existing borrowers can extend their loans up to five years if their lender agrees. The PPFA also allows recipients to delay payment of their payroll taxes.
For specific questions on these changes to Paycheck Protection Program loan forgiveness, contact us.