H.R. 7010 Adds Flexibility to the PPP

President Trump has signed H.R. 7010, the Paycheck Protection Program Flexibility Act (PPPFA), to make changes to the Paycheck Protection Program (PPP), which was cleared by the House and unanimously passed by the U.S. Senate.

Here is what you need to know about what the PPPFA does:

  • Extends the deadline to apply for a PPP loan from June 30, 2020, to Dec. 31, 2020. 
  • The PPP loan forgiveness period is extended to 24 weeks after a loan is issued, or through Dec. 31, or whichever comes first. This is an increase from the current eight week period
    • Businesses that received a PPP loan before the measure was enacted can keep their current eight-week forgiveness period; they are not required to adopt the new 24-week period
  • Extends from June 30 to Dec. 31 the period in which loans can be forgiven if businesses restore staffing or salary levels that were previously reduced. 
    • As long as the FTE or salary/hourly wages are restored to February 15th levels, or any time prior to the end of 2020, no reduction in forgiveness will be required
    • This provision would apply 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 would be 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
  • H.R. 7010 raises the cap for forgivable non-payroll expenses from 25% to 40%. At least 60% of the covered expenses must still be used for payroll costs in order to qualify for loan forgiveness
  • H.R. 7010 repeals a provision from the CARES Act that barred companies with forgiven PPP loans from deferring their payroll tax payments
    • Meaning a borrower of a PPP loan may now also defer all of its 2020 Social Security tax burden into 2021 and 2022, even if the PPP loan is forgiven prior to December 31, 2020.
  • 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 do not apply for loan forgiveness would be given at least 10 months after the program expires to start making payments
  • Establishes a minimum loan maturity period of five years following an application for loan forgiveness, instead of the current two-year deadline. 
    • That provision would apply to PPP loans issued after the measure is enacted, though borrowers and lenders could agree to extend current loans.
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