Paycheck Protection Program Flexibility Act (PPPFA)

In the world of small business, there is good news for business owners looking to use the benefits of the Paycheck Protection Program (PPP) by applying for a loan for the security and continuance of their business. As of June 5, 2020, a new act was signed into law that would enhance those benefits with modifications to the original act to provide more flexibility.

Because of these modifications, the Paycheck Protection Program Flexibility Act (PPPFA) will allow more small businesses access to the PPP while including more flexibility for repayment options as well as allowances to spend PPP funds on non-payroll costs.

Some key provisions of the act include:

• Businesses with forgiven PPP loans may continue to defer Social Security taxes through the end of 2020, rather than requiring a stoppage of Social Security tax deferral as soon as any portion of the loan was forgiven, as was previously mandated through the program.
• Borrowers may extend the eight-week covered period for use of funds to twenty-four weeks (or 12/31/2020, if earlier). If an employer received a PPP loan prior to 6/5/2020, they may choose to use the original eight-week period to spend loan monies.
• The length of time allowed for employers to restore their workforce levels and wages to pre-pandemic levels (which is required for full forgiveness) has been extended through the twenty-four week covered period.
• While borrowers must spend at least 60% on payroll or none of the loan will be forgiven, that amount was reduced from the previous 75%.
• Borrowers now have five years rather than two years to repay the loan, with the interest rate remaining at 1%.
• Borrowers may defer payment until loan forgiveness is determined rather than six months after the loan has been disbursed.
• Based on employee availability, the bill also includes two new exemptions. Under the bill, if borrowers can document an inability to rehire those who were employees on February 15, 2020 or an inability to hire similarly qualified employees for those positions, they may determine a proportion reduction.

To read the entirety of the act, the full text of the PPPFA is available here. The deadline to apply for a PPP loan is still June 30, 2020.

For more details, please call Syed Nishat or Aadil Zaman at 646-783-7561 or 646-783-7562.

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