Jun 8, 2020

Paycheck Protection Program Flexibility Act of 2020

By Robert F. McAnanly, Jr, Esq., Thomas L. Hofstetter, Esq. and Heidi K. Hoffman-Shalloo, Esq.


On June 5th, the President signed the Paycheck Protection Program Flexibility Act of 2020 (the “PPPFA”) into law. We expect the Small Business Administration and the Treasury Department to issue further guidance, in the form of Interim Final Rules and FAQ, designed to clarify implementation of the PPPFA. At this point, we would like to alert you to the following primary provisions of the PPPFA:

  • The loan maturity is extended to five (5) years for all new loans. It was previously two (2) years. Any pre-existing loans may amend the note to reflect new maturity terms if both the lender and borrower mutually agree. 
  • The 75%-25% breakdown of payroll to non-payroll expenses has been adjusted to reflect a breakdown of payroll to non-payroll expenses of 60%-40%.
  • The origination period for PPP loans has been extended from June 30, 2020 to December 31, 2020.
  • The eight (8) week period in which funds must be used to qualify for loan forgiveness has been extended to 24 weeks; however, a borrower may choose to use the originally authorized eight (8) week period.
  • As per the original law, the first loan payment was deferred for six (6) months following loan disbursement. The deferral period shall now commence on the date at which the forgiveness amount is remitted to the lender by the SBA. Borrowers who do not apply for forgiveness shall have ten (10) months from the program's expiration to begin making payments. 
  • Borrowers with forgiven loans will be allowed to defer payroll taxes, effectively overruling a prior IRS decision to the contrary.
  • The safe harbor for rehiring employees has been expanded by allowing that the forgiveness will not be affected by a reduction in employees if the borrower is able to document an inability to rehire individuals, to hire similarly qualified employees, or to return to the same level of business activity as it was operating at before February 15, 2020.
  • Except for the maturity minimum, all changes apply to new and existing loans.

DISCLAIMER: This Alert is designed to keep you aware of recent developments in the law.  It is not intended to be legal advice, which can only be given after the attorney understands the facts of a particular matter and the goals of the client.