PPP Flexibilty Act - BSB

Since its inception in April, there has been much confusion about the Paycheck Protection Program (PPP) and loan forgiveness.  Borrowers now have some good news! On June 5, the Paycheck Protection Program Flexibility Act (PPPFA) was signed into law. The Act provides long-awaited relief for borrowers. 

One of the most notable things about PPPFA is that it will make PPP loan forgiveness much easier.

  • The loan coverage period has been extended from the original eight weeks to 24 weeks from the date of the loan’s origination, or December 31, 2020, whichever comes first. Many businesses have not yet been able to re-open due to continued restrictions from COVID-19, so the extended period will allow those businesses to extend the covered time and continue to pay employees. There are still limitations, including the $100,000 annual salary cap. The 24-week coverage period is optional—borrowers can choose to use the original eight-week option if they have already used all funds and wish to apply for loan forgiveness before the end of the year.
  • The non-payroll cost limit is now 40 percent instead of 25 percent. Still, it’s important to proceed with caution regarding non-payroll expenses. According to the bill, “to receive loan forgiveness under this section, an eligible recipient shall use at least 60 percent of the loan amount for payroll costs.”
  • The FTE/ hourly employee restoration time-period has been extended. Borrowers originally had until June 30, 2020 to restore FTEs or salaried/ hourly employees to Feb. 15, 2020 levels in order to avoid reduction in loan forgiveness eligibility. The new version includes a “safe harbor,” which extends the deadline to Dec. 31, 2020.
  • Businesses who are unable to partially of fully reopen by the end of 2020 may still qualify for full loan forgiveness. Since so many businesses remain unopened and continued restrictions are uncertain, the bill provides relief for affected borrowers. If businesses can document that they were unable to rehire employees, unable to hire similarly qualified employees, or unable to return to the same level of business as February 15 due to continued requirements or government guidance over COVID-19 related concerns and precautions, they will be exempt from reductions in loan forgiveness.

There will also be more time to repay any portions of loans that do not qualify for forgiveness. Originally, the loan maturity date was two years. That has now been extended to five years for PPP loans approved on or after June 5, 2020.  For borrowers who don’t seek loan forgiveness, the PPPFA extends the deferral of principal, interest and fees payments to 10 months after the covered period ends.

Another provision will allow employers to defer some payroll taxes even if they received a PPP loan and loan forgiveness prior to December 31, 2020. Through this incentive, the employers’ share of Social Security taxes can be split over a two-year period with 50 percent paid in 2021 and 50 percent paid in 2022.

The professionals at BSB are monitoring the latest developments and providing updates as soon as they become available. Please keep checking for more information and contact us with any questions you have. We are here to help.