PPP Flexibility Act of 2020

May 29, 2020

By:  Courtney Williams.  The House of Representatives passed the Paycheck Protection Program (PPP) Flexibility Act of 2020 by a vote of 417-1.  The Act amends portions of the PPP and is intended to make it easier for employers to achieve forgiveness of their PPP loans in the following ways:

• Extends the maturity of the portion of the loan that is not forgiven from two years to five years.  It appears from the text of the Act that this section only applies to PPP loans made after the enactment of the Paycheck Protection Flexibility Act of 2020.
• Extends the period for obtaining a PPP loan from June 30, 2020 to December 31, 2020.
• Extends the period to use the loan for eligible expenses and receive forgiveness from 8 weeks to 24 weeks.
• Extends the period for that employers can rehire employees and reinstate their previous salaries and not reduce their forgiveness amount from June 30, 2020 to December 31, 2020.
• Adds another safe harbor that employers are not required to reduce their forgiveness amount due to reduction in employees and reduction in salaries if the employer can document it attempted but was unable to hire employees or that it was unable to return to the same level of business activity it was operating before February 15, 2020 as a result of compliance with governmental requirements or guidance.
• Reduces the amount of the loan that must be used for payroll costs from 75% to 60%.  Under current guidance, the forgiveness amount is proportionately reduced if more than 75% of the forgiveness amount is used on payroll costs.  There is some concern that the language of this Act would result in no forgiveness if employers did not use at least 60% of the loan amount for payroll costs.
• Allows employers who have already obtained a PPP loan to elect to use the current 8-week forgiveness period.
• Extends the deferral of the repayment of the loan from 6 months to the date the forgiveness amount is paid to the lender by the Small Business Administration, but it requires employers to apply for forgiveness within 10 months after the forgiveness period.

The Senate is expected to take up this bill next week.  However, the Senate version of this bill has some differences from the House version:  Most notably, it extends the 8-week period to 16 weeks as opposed to 24.

For more information on how the PPP Flexibility Act of 2020 may affect your business, call Courtney Williams at 334.241.8054.

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