June 5, 2020
The Paycheck Protection Program Flexibility Act (PPP Flexibility Act), which changes some of the components of the Paycheck Protection Program (PPP) provided under the Coronavirus Aid, Relief and Economic Security Act (CARES Act), was passed by the House of Representatives on May 28, 2020, and by the Senate on June 3, 2020. The PPP Flexibility Act is expected to be signed into law soon.
Some of the most significant changes to the PPP loan program are:
The extension of the loan forgiveness period from eight weeks to the earlier of 24 weeks or December 31, 2020;
The adjustment in the 75/25 rule to 60/40 rule. As a result, the prior requirement that borrowers must use 75% of loan proceeds eligible for forgiveness for payroll costs and only 25% for nonpayroll costs now instead requires borrowers to use 60% of the loan proceeds eligible for forgiveness for payroll costs and 40% for nonpayroll costs;
The extension from June 30, 2020, to December 31, 2020, for borrowers to rehire employees in order to avoid any reduction in their loan forgiveness amount; and
An exemption for borrowers who are unable to rehire employees in order to avoid any reduction in their loan forgiveness amount.