Recent changes made to the Paycheck Protection Program

Earlier this month, Congress passed the Paycheck Protection Program Flexibility Act, giving small businesses more flexibility and time to use money received from the Paycheck Protection Program (PPP) and an extended payment deferral.

Here are some of the changes made to the Paycheck Protection Program:

• Provide flexibility for a borrower to use up to 40% rather than 25% of loan proceeds on allowed non-payroll costs such as covered mortgage interest payments, covered rent payments and covered utilities.
• Provide a Forgiveness Covered Period for eligible payroll and non-payroll costs incurred from the loan origin date through the earlier of 24 weeks from the date of loan origination or December 31, 2020 (rather than the previous 8-week period from the date of loan origination).  For loans extended before the effective date of the PPP Flexibility Act, the borrower may still elect a covered period that ends 8 weeks after the origination of the loan.
• Extend principal and interest payment deferral from 6 months to the date on which the amount of forgiveness is remitted to the lender. If a borrower does not apply for forgiveness within 10 months after the end of the Forgiveness Covered Period, the deferral would end on the date that is 10 months after the end of the Forgiveness Covered Period.
• Extend the safe harbor for rehiring employees if the borrower is able to document an inability to rehire individuals, to hire similarly qualified employees, or to return to the same level of business activity operated before February 15, 2020.
• For loans originated after the effective date of the PPP Flexibility Act, extend from two to five years the time the unforgiven portion of PPP loans must be paid back. The maturity on previous PPP loans is not automatically extended but may be extended by mutual agreement of the lender and the borrower.

These highlighted changes are for informational purposes only. If you have questions regarding the PPP Flexibility Act, you should give us a call or consult your CPA. The SBA continues to publish important updated information about the Paycheck Protection Program and may issue additional guidance with respect to loan forgiveness.  We recommend you refer to this information periodically. Loan forgiveness may be very complex for your business. Due to the complexity and evolving nature of PPP rules and guidance, we strongly advise you to seek guidance from our office or your CPA on any complicated loan forgiveness questions.