PPP Loan Forgiveness UPDATE – Flexibility Act

by: Anthony Scalese, CPA – Managing Partner of CSA Capital LLC

June 8, 2020

On June 5, 2020, the Paycheck Protection Program Flexibility Act was signed to provide additional forgiveness guidance and flexibility to businesses participating in the Paycheck Protection Loan Program (PPP).  A high-level of the PPP flexibility act is provided below.

  1. Maturity for loan balances remaining after the forgiveness period has been extended
    • PPP loans will now have a minimum maturity of five years (versus the previous two).
    • Existing PPP loans will allow for borrowers and lenders to mutually agree to modify maturity terms.
  2. Required covered period to use funds has been extended
    • PPP borrowers are now able to extend the use of funds (to be considered for forgiveness) from the earlier of (i) the date that is 24 weeks after loan origination, OR (ii) December 31, 2020 (versus the original eight consecutive week period).
  3. Employee retention period has been extended
    • PPP borrowers now have until December 31, 2020 to rehire and restore wages of full-time employees (versus June 30, 2020).
  4. Employee recruitment and business activity is now considered
    • Loan forgiveness is now considered if the PPP borrower in “good faith” is unable to rehire employees that were in place at February 15, 2020 and unable to recruit similar qualified employees for positions on or before December 31, 2020.
    • Loan forgiveness is now considered if the business is unable to return to the same level of business activity as compared to activity at February 15, 2020 due to mandated compliance for sanitation, social distancing or other worker or customer safety requirements related to COVID-19.
  5. Use of PPP loan funds has been revised
    • Loan forgiveness is now considered if at least 60% of the loan proceeds are used for payroll costs (versus 75%).  However, the 60% threshold is now a cliff, whereas businesses must use at least 60% of the loan on eligible payroll or none will be forgiven.
  6. PPP loan payment deferral period has been revised
    • PPP loan payments may now be deferred until the date on which the amount of forgiveness is remitted to the lender (versus at least six months, but not more than one year).
  7. Payroll tax payment deferral has been extended
    • Businesses who receive loan forgiveness, may defer payroll tax payments for the entire period of March 27, 2020 through December 31, 2020 (versus Mar 27, 2020 through the date the PPP borrower received forgiveness).

This summary is provided for informational purposes only and should not be considered professional, legal, or other advice. 

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