PPP Flexibility Act of 2020


Last night, the Senate unanimously passed the House’s PPP Flexibility Act. This provides relief to business owners who applied for and received PPP funding by easing many of the restrictions. Here are the highlights:

Forgiveness Period for 24 Weeks

Originally, business owners had 8 weeks from the date they received their funds to use them. At the end of that 8 weeks, you had to apply for forgiveness and any unused portion would have been ineligible to be forgiven. This caused issues because business owners were also required to resume employee number and salaries to pre-COVID-19 amounts during a time when most businesses have been unable to fully re-open and re-staff. Under the PPP Flexibility Act, the forgiveness period is defined as beginning on the date of origination and ending on the earlier of 1.) The date that is 24 weeks after date of origination or 2.) December 31, 2020. A business owner may also elect for the covered period to remain at 8 weeks.

Changes to Payroll Percentage

The amount of the loan that must be used for payroll has been reduced from 75% to 60%. However, borrowers must spend at least 60% on payroll or none of the loan will be forgiven. Under the previous rules, a borrower only had to reduce the amount eligible for forgiveness if less than 75% of eligible funds are used for payroll costs, but now if you are under the 60%, forgiveness is entirely eliminated.

Additionally, you are now allowed to delay payroll tax payments.

More Time to Repay

For any portion of the loan that is not forgiven, employers previously had only 2 years to repay, but now that has been extended to 5 years. The interest rate remains at 1%. Given the added time to use the funds for payroll purposes, many more business owners have a chance of reaching full forgiveness for their PPP loan, but those who only spend 60% on payroll costs also get the relief of additional time to repay.

The deferral period has also been extended. Previously, it was only 6 months, but now it is extended through the day the amount of forgiveness is determined. The only caveat is that the business owner must apply for forgiveness within 10 months of the last day of their covered period.

Rehiring Your Workforce

Employers now have until December 31, 2020 to rehire employees to eliminate reduction in their workforce. The original deadline for restoring workforce levels & wages to the pre-pandemic levels was June 30, 2020. In addition to that, the new bill adds an exclusion for decreasing your workforce.

  • Previously, documented refusal of re-employment provided an exception for employers in the rule to retain workforce levels.
  • The new bill adds one exception which allows your workforce to be reduced if you experienced an inability to return to the same level of business due to maintenance standards of sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19.
  • There is also an exception for employers who are unable to hire the same employees or those with the same qualifications that you had on 2/15/20.

Forgiveness Applications

While this new Act makes PPP loans use and forgiveness much easier for business owners, it also makes it even more critical to correctly track and document the use of your PPP funds. Please reach out to our COVID-19 team if you need help creating your timeline, tracking your loan use, and/or applying for forgiveness.

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