Bill to Make PPP Loans More Flexible Becomes Law

June 5, 2020, President Trump signed H.R.7010, the Paycheck Protection Program (PPP) Flexibility Act, into law. The legislation modifies PPP loans and the terms of loan forgiveness to make them more favorable for borrowers.

The Paycheck Protection Program (PPP) Flexibility Act:

  • Extends the PPP loan forgiveness period to include costs incurred over 24 weeks after a loan is issued or through Dec. 31, whichever comes first. Businesses that received a loan before the measure’s enactment could keep the current eight-week period.
  • Extends to Dec. 31 from June 30 a period in which loans can be forgiven if businesses restore staffing or salary levels that were previously reduced. The provision applies to worker and wage reductions made from Feb. 15 through 30 days after enactment of the CARES Act, which was signed into law on March 27.
  • Maintains forgiveness amounts for companies that document their inability to rehire workers employed as of Feb. 15, and their inability to find similarly qualified workers by the end of the year. Under the modified measure, companies are covered separately if they show that they couldn’t resume business levels from before Feb. 15 because they were following federal requirements for sanitization or social distancing.
  • Requires businesses to spend at least 60% of their PPP funds on payroll expenses to qualify for full loan forgiveness, instead of the current 75% rule.
  • Repeals a provision from the CARES Act that barred companies with forgiven PPP loans from deferring their payroll tax payments.
  • Allows borrowers to defer principal and interest payments on PPP loans until the SBA compensates lenders for any forgiven amounts, instead of the current six-month deferral period. Borrowers that don’t apply for forgiveness would be given at least 10 months after the program expires to start making payments.
  • Establishes a minimum loan maturity period of 5 years following an application for loan forgiveness, instead of the current two-year deadline set by the SBA. That provision would apply to PPP loans issued after the measure’s enactment, though borrowers and lenders could agree to extend current loans.

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