Paycheck Protection Program
Flexibility Act of 2020
On June 3, 2020, the Senate passed the Paycheck Protection Program Flexibility Act of 2020 and
it is expected to be signed into law soon. The intent of the Act is to make 100% loan forgiveness
more achievable for borrowers. The following is a summary of the legislation’s main points:
Existing PPP borrowers can choose to keep the 8-week covered period or extend the previous 8-week period to 24 weeks. New PPP borrowers will have a 24-week covered period, but the covered period cannot extend beyond December 31, 2020.
The legislation includes new exceptions to the reduction in workforce criteria. The first allows
borrowers to achieve full PPP loan forgiveness even if they could not find qualified employees
and the second allows forgiveness for those unable to restore business operations to
February 15, 2020 levels due to COVID-19 related operating restrictions (Example: capacity
limitations do not allow for a full staff to return to work). If the business does not meet the
criteria above, they will have until December 31, 2020 to restore the workforce to pre-
February 15, 2020 levels, a change from the previous deadline of June 30.
The payroll expenditure requirement drops to 60% from 75% but is now a cliff, meaning that
borrowers must spend at least 60% on payroll or none of the loan will be forgiven. *A technical
correction is expected to be introduced to update the verbiage to change this to a pro-rata
reduction in forgiveness.
The term of new PPP loans is now five years rather than two years for any loan amount not
forgiven. Existing PPP loan terms may be amended by agreement between the borrower and
lender to extend the term of the loan to five years. The interest rate remains at 1%.
Borrowers have until 10 months after the end of the covered period to request forgiveness. If
a borrower applies for forgiveness, repayment starts after a determination of the forgiven
amount is communicated. If a borrower does not apply for forgiveness, repayment starts 10
months after the end of the covered period.
Businesses that took a PPP loan may now also delay payment of their payroll taxes, which
was previously prohibited under the CARES Act.
We at TJ Advisors are committed to bringing you the most relevant and up to date information
in an effort to help your business stay on track during this period of uncertainty. Please reach out
directly so that we can provide the business support you need in these unprecedented times.