[US] COVID-19 Paycheck Protection Program Flexibility Act

The Paycheck Protection Program Flexibility Act (PPPFA) was signed into law by President Trump on Friday June 5th, 2020. It is the latest of several relief bills that have been passed in an attempt to help business during the current pandemic. The PPPFA amends portions of the previous passed CARES Act.

July 4, 2020 update: The President has signed into action Bill S. 4116 extending the application deadline for the PPP to August 8, 2020 and separating the authorized limits for commitments under the PPP from other Small Business Administration loan programs.

To better illustrate what has changed, we will compare the new rules to the original rules passed for the PPP loan and loan forgiveness. For more information, the Small Business Administration outlines the PPP here.


Old rule:
You had two years to pay back the loan.
New rule:
You now have 5 years.


Old rule:
The loan had to have been used in full within 8 weeks after receiving the funds.
New rule:
You now have 24 weeks to use the loan.


Old rule:
The PPP loan forgiveness rule dedicated that the proceeds must be used within eight weeks from the date the loan was funded.
New rule:
The criteria has changed to have the proceeds used by whichever of the following occurs first:

  • Within 24 weeks from the date the loan was funded; or
  • By December 31, 2020.

Please note that the application deadline for the PPP is August 8, 2020.


Old rule:
For full PPP forgiveness, you had to have used 75% of the loan on payroll costs.
New rule:
The 75% rule has been reduced to 60%. If less than 60% is used for payroll, you may still be eligible for a partial forgiveness.


Old rule:
You had until June 30, 2020 to rehire employees.
New rule:
You now have until December 31, 2020.


Old rule:
The eligible forgiveness amount was to decrease if your headcount or wages paid were reduced after February 15, 2020. You had until June 30, 2020 to reverse those deductions.
New rule:
The eligible forgiveness amount will not decrease if you can, in good faith, document the inability to rehire employees that were on your payroll on or before February 15, 2020, and/or the inability to hire new employees for those roles by December 31, 2020. An example of this would be a written offer to rehire workers that was declined.


Old rule:
If you were unable to return to the full level of business (where you were at before February 15, 2020) you would be ineligible for loan forgiveness.
New rule:
If you do not meet this criteria, you will still be eligible for loan forgiveness.


Old rule:
If you had loan forgiveness, you would have to immediately stop deferring your employer portion of social security tax going forward.
New rule:
Even if you have loan forgiveness, you can continue to defer your portion of social security tax.

 

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