On Friday, June 5, 2020, the Paycheck Protection Program Flexibility Act (PPPFA) became law. Pursuant to the PPPFA, current PPP borrowers can choose to extend the original eight-week period spend the PPP funds to 24 weeks, or they can keep the original eight-week period. New PPP borrowers will have a 24-week covered period, but the covered period can’t extend beyond Dec. 31, 2020. This flexibility is designed to make it easier for more borrowers to reach full, or almost full, forgiveness.
Pursuant to the PPPFA, the amount of the PPP that must be spent on payroll drops from 75% to 60%.
Borrowers can now use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness, but no later than Dec. 31, 2020 (the prior deadline was June 30, 2020).
The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020, levels due to COVID-19 related operating restrictions.
New borrowers now have five years to repay the loan instead of two.
Existing PPP loans can be extended up to 5 years if the lender and borrower agree. The interest rate remains at 1%. The PPPFA also allows businesses that took a PPP loan to also delay payment of their payroll taxes, which was prohibited under the CARES Act.