SPECIAL REPORT: Important PPP Changes
On Wednesday, June 3, 2020, the Senate passed the Paycheck Protection Program Flexibility Act of 2020 (the “Act”). The bill passed in the House on May 28 and was signed into law by the President on June 5, 2020. The Act provides important new flexibility for borrowers in the Paycheck Protection Program (“PPP”). Here is a summary of the Act and how it impacts borrowers under the PPP:
The Act extends the covered period from the original 8 week period after the loan was originated to 24 weeks from the origination date of the loan or December 31, 2020, whichever is earlier. Current borrowers who have received their loans prior to the enactment of the Act may elect for the covered period to end on the date that is 8 weeks after the date of loan origination.
The Act requires only 60% of forgivable expenses be used toward payroll costs, as opposed to 75%. It is expected that the SBA will issue new guidance to conform its guidelines to this legislation.
The Act extends the period in which borrowers must restore full-time equivalent employees (“FTE”) from June 30, 2020 to December 31, 2020. This means, if a borrower spends 100% of the loan on payroll costs and other eligible expenses, subject to the 60% rule mentioned above, during the twenty-four-week period and its FTE count on December 31 equals or exceeds its FTE as of February 15, the borrower’s entire loan amount will be forgiven.
Forgiveness amount will not be reduced due to a reduced FTE count if the borrower can document that they attempted, but were unable, to rehire individuals who had been employees on February 15, 2020 and have been unable to hire “similarly qualified employees” before December 31, 2020.
Forgiveness amount will not be reduced due to a reduced FTE count if the borrower, in good faith, is able to document an inability to return to the same level of business activity as prior to February 15, 2020 due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration during the period beginning on March 1, 2020 and ending December 31, 2020, related to the maintenance of standards for sanitation, social distancing, and worker or customer safety requirements related to COVID-19.
The maturity date for all future PPP loan is extended from two years to a minimum of five years.
The Act extends the loan deferral period to the date the borrower’s loan forgiveness amount is determined or 10 months after the covered period if a borrower does not apply for forgiveness.
The Act allows PPP borrowers to take advantage of the existing payroll tax deferrals permitted under the CARES Act.
Please be aware that the information contained herein is current as of the date of the release of this Special Report and is subject to further changes and modifications by federal and local officials. If you have any questions or need additional information, please contact us.
CONTACT:
Andrew J. Annes, Esquire
aannes@satclaw.com
Mobile: (312) 246-3110
John W. Campbell, Jr., Esquire
jcampbell@satclaw.com
Mobile: (312) 391-3126
Websites:
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