PPP Loan Forgiveness Flexibility

Contributed by: Robert Franger, Staff Accountant

House Bill 7010 titled the Paycheck Protection Program Flexibility Act of 2020 was signed into law on Friday, June 5, 2020. This bill provides changes to the PPP loan forgiveness process in an attempt to strengthen certain nonprofits and small business across the country, while also attempting to deploy the $100+ million in undistributed funds that still sit within the PPP program.

Notable Changes:

  • Forgiveness deadline moves from June 30, 2020 to December 31, 2020
  • Rehiring of EE’s deadline extended from June 30, 2020 to December 31, 2020
  • Allows for an option to extend the covered period for the use loan funds from 8 weeks to 24 weeks, or to December 31, 2020, whichever comes first
    • Gives borrower much more time to actually use the funds and increases likelihood of forgiveness
  • Ease up Forgiveness provisions:
    • The forgiveness is tied to restoring the number of full-time employees with a similar wage amount as before the pandemic began (for all employees making less than $100,000) to be eligible for forgiveness. The ease in rehiring requirements includes two additional exceptions: 1) the inability to hire similarly qualified employees, 2) or an inability to return to operation levels due to compliance requirements established or guidance issued by the U.S. Department of Health and Human Services, CDC or OSHA
    • Payroll cost requirement dropped from 75% to 60%, meaning now 40% can be used for other necessary costs (such as rent/mortgage interest or utilities). This further increases the likelihood of forgiveness as more funds can be used for non-payroll items
  • Maturity for loans (funds not qualifying for forgiveness) extends from the previous 2 years to 5 years
    • 1% interest rate (unchanged)
  • Made PPP participants eligible for employer payroll tax deferral
    • 2% can be deferred through December 31, 2020
  • The time frame for applying for a PPP loan was not extended. The deadline is still June 30, 2020

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