The PPP Flexibility Act recently passed the House and Senate and has been signed by the President. This bill allows greater latitude for Paycheck Protection Program borrowers. This means PPP loan recipients are granted more time and greater flexibility to utilize their funds while remaining eligible for loan forgiveness.
Current PPP borrowers can choose to extend the eight-week period to utilize the funds to twenty-four weeks, or they can keep the original eight-week timeframe. New PPP borrowers will have a 24-week covered period, but the covered period cannot extend beyond December 31, 2020. This flexibility is designed to make it easier for more borrowers to maximize their loan forgiveness. Businesses now have five years to repay the loan instead of two with the same interest rate at 1%.The maturity on previous PPP loans is not automatically extended but may be extended by mutual agreement of the lender and the borrower. In the previous PPP loan agreement, borrowers had to devote a minimum of 75% to payroll expenses. Under the PPP Flexibility Bill, borrowers must spend at least 60% on payroll and no more than 40% for payments of interest on covered mortgage obligations, rent and utilities.This update includes additional exceptions which should help borrowers reach full PPP loan forgiveness:
The forgiveness amount will not be reduced if an employer can document an “inability to rehire individuals who were employees of the eligible recipient on February 15, 2020”; and, “an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020”.
The borrower is able to document an inability to return to the same level of business activity as such business was operating at before February 15, 2020, due to compliance with requirements related to Covid-19 related operating restrictions.