Paycheck Protection Flexibility Signed into Law

June 10, 2020

On June 5, President Trump signed into law the Paycheck Protection Program Flexibility Act (H.R. 7010) which will provide thousands of small businesses with meaningful relief as they struggle to survive the long-term effects of the COVID-19 pandemic.

H.R. 7010 was introduced in the House by Reps. Dean Phillips (D-Minn.) and Chip Roy (R-Texas) and companion legislation was offered in the Senate by Sens. Tim Kaine (D-Va.), Thom Tillis (R-N.C.), Debbie Stabenow (D-Mich.) and Cory Gardner (R-Colo.).

Below are some of the key improvements the bill will make:

  • Change the program sunset date from June 30, 2020 to December 31, 2020;
  • Extend the rehiring deadline for loan forgiveness from 8 to 24 weeks;
  • Lengthen the loan maturity date from 2 to 5 years;
  • Extend the rehiring deadline to align with the expiration of enhanced Unemployment Insurance;
  • Lower the forgiveness payroll expenses threshold from 75 percent to 60 percent; and
  • Provide a “Borrower’s Choice” provision, which allows those who received PPP loans prior to enactment to choose for the covered period of their loan to either last 8 weeks or 24 weeks from origination.

“These common-sense tweaks to a massive funding program will simply provide small businesses with the flexibility they need to weather this ongoing storm,” stated NSBA President Todd McCracken. “It is not just the survival of the business that is impacted but the livelihoods of their employees, their families and the communities they serve all now face serious problems related to the COVID-19 pandemic.”

SBA is expected to issue guidance soon, but has released the following statement regarding the bill:

“SBA, in consultation with Treasury, will promptly issue rules and guidance, a modified borrower application form, and a modified loan forgiveness application implementing these legislative amendments to the PPP.  These modifications will implement the following important changes:

  • Extend the covered period for loan forgiveness from eight weeks after the date of loan disbursement to 24 weeks after the date of loan disbursement, providing substantially greater flexibility for borrowers to qualify for loan forgiveness.  Borrowers who have already received PPP loans retain the option to use an eight-week covered period.
  • Lower the requirements that 75 percent of a borrower’s loan proceeds must be used for payroll costs and that 75 percent of the loan forgiveness amount must have been spent on payroll costs during the 24-week loan forgiveness covered period to 60 percent for each of these requirements. If a borrower uses less than 60 percent of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness, subject to at least 60 percent of the loan forgiveness amount having been used for payroll costs.
  • Provide a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees for borrowers that are unable to return to the same level of business activity the business was operating at before February 15, 2020, due to compliance with requirements or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to worker or customer safety requirements related to COVID–19.
  • Provide a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees, to provide protections for borrowers that are both unable to rehire individuals who were employees of the borrower on February 15, 2020, and unable to hire similarly qualified employees for unfilled positions by December 31, 2020.
  • Increase to five years the maturity of PPP loans that are approved by SBA (based on the date SBA assigns a loan number) on or after June 5, 2020.
  • Extend the deferral period for borrower payments of principal, interest, and fees on PPP loans to the date that SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period).
  • In addition, the new rules will confirm that June 30, 2020, remains the last date on which a PPP loan application can be approved.”

As of the publish date of this article, formal guidance has not yet been released.

Click here to view NSBA’s letter in support of the bill.

Click here to view NSBA’s statement of support on passage of the bill.

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National Small Business Association

National Small Business Association