Earlier this month, the Paycheck Protection Program Flexibility Act (the “Flexibility Act”) was enacted, broadening the options for borrowers and making Paycheck Protection Program (“PPP”) loans even more attractive. The Flexibility Act is applicable to loans issued on or after June 5, 2020, and provides the following:
Maturity date of 5 years after the origination of the loan
Borrowers who received PPP loans prior to June 5th can approach their lenders and ask for a mutual, written agreement extending the maturity date from 2 years to 5 years.
Extension of commencement of repayment of the loan (i.e., those amounts that are not forgiven) from 6 months (under the PPP) to the date of the approval of the loan forgiveness amount (under the Flexibility Act).
Interest continues to accrue during this period.
Relaxation of requirements for loan forgiveness (which can include principal plus interest):
Extension of the “covered period” from 8 weeks (under the PPP) to 24 weeks or Dec. 21, 2020, whichever is earlier (under the Flexibility Act) from date of disbursement of funds.
Borrowers who received their loan prior to June 5th can elect the 8-week period rather than the 24-week period: Loan forgiveness calculations will determine which time period is most beneficial.
60% (or more) of the loan must be used for payroll costs, rather than the 75% requirement under the original PPP.
Provides greater flexibility for those employers who have a reduction in full-time equivalent employees.
Important Notes:
The deadline to apply for a PPP loan is Tuesday, June 30th!
Borrowers are encouraged to start doing their loan forgiveness calculations as soon as possible so as to maximize that amount!
Please be careful to avoid overlap in the use of the PPP and the Economic Injury Disaster Loans (EIDLs): You cannot use these two loans for the same purpose.
Note: The information reflected above is subject to change by the US Government, including the US Department of the Treasury and the Small Business Administration.