Congress Enacts Amendments to the Paycheck Protection Program

Written by: Natalie Klyashtorny


Last week, Congress passed and President Donald Trump signed into law the Paycheck Protection Flexibility Act (“PPFA”), amending the Paycheck Protection Program (PPP) and bringing much needed potential relief to businesses still struggling as a result of the Covid-19 pandemic. The PPFA provides greater flexibility to recipients of PPP loans in several important ways.

Loans under PPP may now be used to cover business expenses from the time period of February 15, 2020 through December 31. 2020, as opposed to the previous deadline of June 30, 2020. 

Under the original law, in order to qualify for loan forgiveness, a recipient was required to spend the loan proceeds in 8 weeks from the loan origination date.  A recipient will now have the earlier of 24 weeks or December 31, 2020 to spend the proceeds.  Recipients still have the option to utilize the 8-week period if they received the loan proceeds prior to the enactment of the PPFA.  This amendment is intended to alleviate the hardship experienced by businesses who have been unable to open or have to open at reduced capacity due to government-mandated shutdowns of non-essential businesses. 

The PPFA also modified the percentage of the forgivable loan that must be used for payroll expenses from 75% to 60%, giving recipients more flexibility to spend the money on non-payroll expenses, such as mortgage interest, rent and utilities. 

Likewise, loan recipients will now have until December 31, 2020 to rehire laid-off or furloughed employees to qualify for forgiveness. 

Furthermore, to alleviate hardship for businesses who are unable to rehire workers, the amount of loan forgiveness will be determined without regard to a proportional reduction in the number of full-time equivalent employees if an eligible recipient, in good faith, is able to document: (i) an inability to rehire individuals who were employees of the eligible recipient on February 15, 2020; and (ii) an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020.

This exemption will also apply if the recipient, in good faith, is able to document an inability to return to the same level of business activity that such business was operating at on or before February 15, 2020, due to ongoing compliance with COVID-19 related safety and social distancing requirements.

Additionally, recipients who apply for loan forgiveness will now be allowed to delay payment of payroll taxes. 

Borrowers are allowed up to 10 months from the date their covered period ends to apply for loan forgiveness and for those recipients who do not qualify for loan forgiveness, the maturity date of the loans has been extended from 2 years to 5 years. 

If you have any questions about these newly enacted amendments to the PPP, or require assistance with any legal matter as a result of the pandemic, we are offering consultations at no cost. To learn more, please visit http://covid19.nochumson.com/. We look forward to helping you and your business.