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President Signs the Paycheck Protection Flexibility Act: What You Need To Know

June 5, 2020
Public Finance Advisory

On June 5, 2020 President Trump signed the Paycheck Protection Program Flexibility Act (the PPP Flexibility Act). Importantly, for existing PPP loans, the PPP Flexibility Act provides the following:

  • Extends the forgiveness covered period to the earlier of 24 weeks after the date of the loan (increased from eight weeks) or December 31, 2020
    • A borrower under an existing PPP loan can elect to use the eight-week period
  • Extends the rehire exemption date to December 31, 2020 (extended from June 30, 2020)
  • Adds exemptions to the forgiveness reductions due to workforce reductions if the borrower can in good faith document:
    • An inability to rehire employees and hire similarly qualified employees for unfilled positions on or before December 31, 2020; or
    • An inability to return to the same level of business activity as such business was operating at on February 15, 2020 due to compliance with governmental restrictions imposed by the secretary of Health and Human Services, the director of the Centers for Disease Control and Prevention or the Occupational Health and Safety Administration during the period March 1, 2020 through December 31, 2020
  • Requires at least 60 percent of the forgiveness amount to be attributable to payroll costs (decreased from 75 percent) and allows up to 40 percent to be attributable to non-payroll costs (increased from 25 percent)
  • Extends the deferral period for payments of principal, interest and fees to the date on which the forgiveness amount is remitted to the lender
    • A borrower must apply for forgiveness within 10 months after the forgiveness covered period or the deferral period will end

For new PPP loans, the PPP Flexibility Act provides for a minimum maturity of a PPP of five years.

Additional PPP Advisories

SBA Issues Final Rules for PPP Loan Forgiveness and Loan Review Procedures
Public Finance Advisory, May 27, 2020

SBA Issues PPP Forgiveness Application and New Interim Rule on Eligibility
Public Finance Advisory, May 18, 2020

SBA Issues New Guidance on Certification Relating to PPP Necessity
Public Finance Advisory, April 23, 2020

SBA Issues Interim Rules on and Final Application for the $349 Billion Paycheck Protection Program
Public Finance Advisory, April 3, 2020

Paycheck Protection Program, a SBA Loan Program Expanded in CARES ACT
Public Finance Advisory, March 27, 2020

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