Borrowers Will Find Some Relief in
Paycheck Protection Program Flexibility Act

President Trump signed the Paycheck Protection Program Flexibility Act today.  As the first 8-week deadline approached, congress moved to repair the program which had been criticized as not taking into account the difficulties posed by mandated closings and social distancing. The program had been largely governed via guidance letters and frequent FAQ updates. The law includes the following provisions:

■ Expands the 8-week forgiveness period to 24 weeks, although a business can opt to stay with the earlier 8-week forgiveness period. Link

■ Changes the covered period to either December 31, 2020, or 24 weeks after the date of origination, whichever is earliest. Link

■ Reduces the requirement that a minimum of 75% of the loan be used for payroll expenses. The requirement is lowered to 60% but there is no longer any partial loan forgiveness for borrowers who do not meet the minimum. Link

■ Extends rehiring deadline to December 31, 2020. Link

■ Permits full loan forgiveness despite a reduction in workforce in cases where businesses could not rehire an employee and were also unable to replace that employee with a similarly qualified candidate before December 31, 2020. Link

■ Permits full loan forgiveness in cases where the borrower can document that inability to return to the same level of business activity he or she had before February 15, 2020, was due to compliance with COVID-19 restrictions. Link

■ Extends the 2-year payback period to a minimum of 5 years, which will not be applied retroactively. Loans already processed will continue to be governed by existing contracts. Link

■ Permits unlimited deferment of social security taxes. Link

■ Extends the six-month deferral period until forgiveness is determined. The extension for borrowers not seeking forgiveness, is ten months. Link