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Paycheck Protection Program Flexibility Act (PPPFA)

On June 5, 2020, the Paycheck Protection Program Flexibility Act (PPPFA) was signed into law modifying the Paycheck Protection Program (PPP) and making loan forgiveness more accessible for business owners. The Paycheck Protection Program Flexibility Act (PPPFA) amends sections of the original Small Business Act and the CARES Act including covered period extensions, employee availability, minimum loan terms, and deferral payments.

Although we expect the SBA and US Treasury will soon provide additional guidance on the new Act. 

The following are key points to the PPPFA:
Covered Period:

The PPPFA revised the definition of the covered period. As businesses struggle to reopen and manage social distancing expectations at work, they have the option to spread the funding across a 24-week period or use the original eight weeks if they already received their loan before the enactment of PPPFA. For new loans after enactment, the covered period will be 24 weeks.  In either case, the covered period cannot extend later than December 31, 2020.

Rehiring Employees:

Similar to the covered period extension, the June 30, 2020 deadline to rehire employees and reverse salary cuts has been moved to December 31, 2020. For businesses that expect to remain closed through June, this provision provides a much-needed delay.
Borrowers may also provide a good faith document that from February 15 to December 31, 2020, that states (1) they were unable to rehire employees or make new hires or (2) open roles and return to the same level of business activity due to sanitation standards, social distancing, or other safety requirements related to COVID-19. The documentation now allows borrowers to receive loan forgiveness despite staffing reductions.

Loan Forgiveness:

Originally, 75% of the PPP loan funds had to be used to maintain payroll in order to receive loan forgiveness. The PPPFA, however, amends that ratio to 60%. This change is important for businesses where monthly expenses are not dominated by payroll costs (ie: high rent, etc).

Minimum Loan Term:

The term, for loans on or after date of enactment of this Act, will be for a minimum period of five years. Loans funded before enactment must negotiate with their bank in order to extend the term.

Payroll Tax Deferral:

PPP loan recipients are now eligible to defer the employer’s share of Social Security taxes otherwise due on March 27, 2020 through December 31, 2020 (50% deferrable to December 31, 2021 and balance to December 31, 2022). The CARES Act specifically precluded borrowers whose PPP loans are forgiven to be able to participate in the deferral of payroll taxes. That exception has now been removed to assist with cash-flow for still-struggling businesses.

For more information, contact Michael Ceschini.