Businesses that receive forgivable loans through the Paycheck Protection Program (PPP) would get additional time and flexibility to make use of those funds under the pending legislation. Last week, the House passed H.R. 7010, the Paycheck Protection Program Flexibility Act of 2020 (“PFA”) in nearly unanimous fashion with only a single dissenting vote. Yesterday, the Senate approved the PFA unanimously, meaning it is now headed to the President’s desk to become law – hopefully.
Under the PPP Flexibility Act, businesses not already receiving a PPP loan will have until December 31, 2020 to apply provided funds remain available. Further, the Act proposes extending the covered period used to determine loan forgiveness for amounts spent on forgivable expenses from 8 weeks to 24 weeks following loan origination, or December 31, 2020, whichever occurs first.
Once this Act becomes law borrowers would meet the forgiveness threshold that previously required 75% of loan proceeds to be dedicated to payroll will be lowered to 60%. Meaning borrowers may use an additional 15% of the PPP loan, for a total of 40% for other eligible expenses, for example, rent, utilities, and mortgage interest.
As for the rehiring safe harbor time period, it has also been extended to December 31, 2020, which allows borrowers to rehire the employees who were laid off or had salaries reduced between February 15, 2020 and June 30, 2020. Therefore, borrowers would now have until December 31, 2020, instead of the original 8-week period, to rehire employees, increase existing payrolls, or potentially fully restore prior payroll levels without any reduction in the forgiveness amount.
Also in addition to the added flexibility the Act now gives to PPP Loan takers, the Act will also prevent loan forgiveness from being reduced in the case of a borrower being unable to rehire an employee, hire a replacement, or otherwise return to pre-COVID-19 pandemic staff levels.
Given the flux of the economy caused by the pandemic, these changes will inevitably help millions of American employers and employees ride out this storm.
Rose Law Group PC has been helping PPP borrowers for months, and is prepared to assist with any number of related issues. Our attorneys are available to draft substantiation memorandum to support and document the continuing necessity of the loan and manage government audits.
The information in this article does not, and is not intended to constitute legal advice; instead, the information is for general purposes only and for the convenience of the reader. To set up a consultation please contact Adam Trenk, Esq. at email@example.com or by phone at (480)240-5647.