Paycheck Protection Program (PPP) Flexibility Act

June 25, 2020

On Friday, June 5, 2020, the Paycheck Protection Program (PPP) Flexibility Act was signed into law as a standalone legislation designed to ease current PPP forgiveness requirements. Highlights of the PPP Flexibility Act are as follows:

Extends the window of time that businesses must use the funds:

  • Extended the current 8-week period to 24-weeks or December 31, 2020, whichever comes first.
  • Borrowers may self-elect to use the 8-week period.
  • Borrower has 10 months from the end of their PPP Forgiveness Covered Period to apply for loan forgiveness.
  • Use Form 3508EZ to apply for PPP Loan forgiveness.

Relaxes the 75/25 rule:

  • Required payroll spending reduced from 75% to 60% of total PPP funds spent.

Rehire exemption: Expands the exemptions related to reduction of employees based on employee availability. The forgiveness amount will not be affected by a reduction in employees if the borrower is:

  • Able to document an inability to rehire individuals by December 31, 2020;
  • Unable to hire similarly qualified employees by December 31, 2020; or
  • Unable to return to the same level of business activity as it was operating at before February 15, 2020.

Extends the loan term:

  • New loans term extended from two years to five years.
  • Existing borrowers will retain the two-year term but may negotiate a longer-term subject to their bank's approval.

Extends the deferral period: Provides for the extension of the payment deferral period from six months to either;

  • For borrowers that timely submit forgiveness applications, until the SBA has remitted approved forgiveness amount to Bank; or,
  • For borrowers who have not applied for forgiveness, until 10 months after the end of the covered period.

Defer payroll taxes: Allows borrowers with forgiven loans to defer payroll taxes.

Conclusion:

The Flexibility Act provides small businesses with more mobility on how and when they spend their PPP Loan money. D&S is committed to helping their Client's track PPP Loan expenditures, maintain compliance with SBA guidelines, and apply for loan forgiveness at the end of their covered period.

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