Paycheck Protection Program Flexibility Act

On June 5, 2020, the President signed the PPP Flexibility Act, loosening restrictions on small business loan recipients.

Loans made under the PPP are eligible for forgiveness if the borrower meets certain requirements, including the use of the loan proceeds for qualifying expenses. The Act makes several key changes to those requirements including:

  • Decreases the amount that must be spent on payroll costs from 75% to 60%.
  • Extends the period over which qualifying expenses must be paid from 8 to 24 weeks after the loan issuance date. Borrowers that received loans prior to the law’s enactment date may choose to apply the original 8-week period.
  • Extends the period in which borrowers can restore previous staffing or salary levels and still qualify for loan forgiveness from June 30, 2020 to December 31, 2020. The Act also provides exemptions to the reduction to PPP loan forgiveness based on employee staffing levels.
  • Extends the repayment period for the amount of a PPP loan that is not forgiven from 2 to 5 years.
  • Extends the period that a borrower may defer principal and interest payments on loan proceeds that will be repaid from 6 to 10 months. The Act also provides a deferral of principal and interest payments until the SBA compensates lenders for forgiven loan amounts.
  • Extends the application deadline for a PPP loan from June 30, 2020 to December 31, 2020.
  • Removes the CARES Act restriction that made borrowers with forgiven PPP loan proceeds ineligible to defer payroll tax payments.

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