Passage of Paycheck Protection Program Flexibility Act of 2020 Brings Significant Changes to the Paycheck Protection Program


On Wednesday evening, June 3, 2020, the Senate unanimously passed the Paycheck Protection Program Flexibility Act (the “Act”). The Act, which was passed by the House last week, brings some welcome changes to the Paycheck Protection Program (“PPP”). It is expected to be signed into law in the next few days.

The purpose of the Act is to assist businesses in their recovery from the effects of the COVID-19 pandemic by providing PPP borrowers with more flexibility in the use of PPP loan funds and by loosening some of the previous requirements relating to PPP loan forgiveness.

The following is a summary of the Act’s key provisions.

  • The period during which PPP loan proceeds can be used in order to be eligible for loan forgiveness has been extended from eight weeks to the lesser of 24 weeks or the period starting on the PPP loan origination date and continuing through December 31, 2020.
  • The minimum amount of PPP loan proceeds which must be used on payroll costs for loan forgiveness purposes was reduced from 75% to 60%. Notably, however, in order to receive any loan forgiveness, a borrower must meet that 60% threshold.
  • The term of a PPP loan will now be five years, extended from the prior two year term established by the SBA and the Treasury Department.
  • The period during which an employer may rehire employees or otherwise eliminate a reduction in employees or wages in order to remain eligible for the maximum PPP loan forgiveness was extended from June 30 to December 31, 2020.
  • A safe harbor was established for loan forgiveness reduction purposes for (i) employers unable to either rehire workers or to hire similarly qualified workers on or before December 31, 2020, and/or (ii) employers which are unable to return to the same level of business activity as they were at on or before February 15, 2020 due to compliance with federal regulations or guidance established from March 1, 2020 through December 31, 2020 relating to COVID-19. If an employer meets this safe harbor, the employer does not need to count the resulting reduction in full time equivalent employees in calculating loan forgiveness reduction.
  • A borrower’s PPP loan repayment is deferred until the borrower receives a determination on its loan forgiveness application from the SBA or, if no loan forgiveness is requested, until 10 months after the end of the borrower’s covered period.
  • PPP borrowers which receive forgiveness of a PPP loan can now utilize the payroll tax deferral provided under the CARES Act.

Generally, the Act provides much more flexibility for PPP borrowers in the use of PPP loan proceeds and in the ability to obtain loan forgiveness.

If you have questions on the Paycheck Protection Program or the CARES Act or Paycheck Protection Program and Health Care Enhancement Act, you can reach out to the attorneys at Atkinson, Andelson, Loya, Ruud & Romo.

This AALRR publication is intended for informational purposes only and should not be relied upon in reaching a conclusion in a particular area of law. Applicability of the legal principles discussed may differ substantially in individual situations. Receipt of this or any other AALRR publication does not create an attorney-client relationship. The Firm is not responsible for inadvertent errors that may occur in the publishing process. 

©2020 Atkinson, Andelson, Loya, Ruud & Romo



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