The Paycheck Protection Program Flexibility Act (HR 7010) was signed into law on June 5, 2020.  We thought it would be helpful to share what we have gleaned from the bill so that you can consider how it may affect your business.

Here are the highlights of the changes to the PPP Program as per the bill:

  • It adds a minimum maturity of 5 years for covered loans.
  • The loan maturity rule takes effect on enactment, but allows lenders/borrowers to modify existing PPP loans to conform with new law.
  • The definition of “covered period” is extended to run through 12/31/2020 under the CARES Act.
  • For forgiveness purposes, covered period means the period beginning on the loan funding date and ending the earlier of (1) 24 weeks or (2) 12/31/2020.
  • Restoration of full-time employee (FTE) and Salary Reduction must be complete not later than 12/31/2020 in order to avoid forgiveness reduction.
  • A new clause is added allowing for forgiveness reduction exemption with respect to FTE where an employer documents it:
    • Employers (1) cannot rehire individuals who were employees on 2/15/20 AND (2) cannot hire similarly qualified individuals for unfilled positions on or before 12/31/2020; OR
    • Employers cannot return to the same level of business activity as it had before 2/15/2020 due to compliance with requirements established on account of COVID-19 (NOTE:  There will need to be regulations governing how this will work, criteria, what if it is true only for a period, etc.)
  • A new clause states that at least 60 percent of a covered loan must be used for payroll costs, and up to 40% on non-payroll costs 
  • A new clause states that an employer may elect to use an 8-week covered period which is the current law.
  • Loan deferment parameters have changed so that payment will be deferred until the date forgiveness amount is remitted to the lender. The employer has 10 months from last day of covered period to apply for forgiveness, but if it fails to do so, it will be obligated to make payments of principal, interest and fees not earlier than 10 months from end of covered period
  • It eliminates the restriction on delay of paying employer payroll taxes.

Things to Note:

  • No change was made to the definition for compensation cap; therefore, we take this to mean that if the 24-week period is elected, the cap will be $46,154 per person for the 24-week period.
  • Guidance is still needed in the area of calculating Employee Salary Reduction as law/rules/application are conflicting.

Needless to say, we will update this post as new information comes to light. In the mean time, you may read the text of HR 7010 here.  And, as always, please contact us to discuss your particular situation with respect to this bill.