Paycheck Protection Program Flexibility Act of 2020
In response to the criticism of the PPP Loans and the SBA’s Administration of same, the Legislature enacted the Paycheck Protection Program Flexibility Act of 2020 (commonly referred to as “PPPFA”) to adjust some of the SBA’s guidance to be more flexible and to assess common business issues. The following is the side by side comparison of the change of terms and conditions on PPP loans. This will undoubtedly le:
|
Issue |
Prior Treatment |
Current Treatment Under The New PPPFA |
|
Maturity Date |
2 years from receipt of loan funds |
Minimum maturity is 5 years with a maximum maturity of 10 years after loan forgiveness
**Applies only to those loan made on or after June 5, 2020 but allows for Lenders and Borrowers to mutually agree to modify the maturity terms of PPP loans. |
|
Covered Period for disbursement of PPP Loans |
From February 15, 2020 to June 30, 2020 |
From February 15, 2020 to December 31, 2020 |
|
Covered Period for Loan Forgiveness |
8 weeks from the loan disbursement |
24 weeks after loan disbursement or December 31, 2020, whichever is earlier.
The Borrower may elect to use the 8-week period of time as their covered period of time for loan forgiveness for any loan made prior to June 5, 2020. |
|
Exemption for Re-Hires |
Reinstatement of employees subject to layoffs or reductions in hours had to be re-hired by June 30, 2020 |
Reinstatement of employees subject to layoffs or reductions in hours have to be reinstated by December 31, 2020. |
|
Reductions to Loan Forgiveness |
The amount of loan forgiveness could be reduced based on the reduction in full time employees. The SBA released a number of exemptions that applied to this reduction. |
This is essentially another two exemptions to any applicable reduction in loan forgiveness: The amount of loan forgiveness shall not be reduced by the percentage of employees, (a) if the Borrower in good faith can document (1) the inability to rehire individuals who were employees on February 15, 2020 and (2) the inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020 OR (b) the Borrower is able to document its inability to return to the same level of business activity as operations were before February 15, 2020 due to CDC, OSHA or DHH guidelines for safety and sanitation related to COVID-19 in effect from March 1, 2020 through to December 31, 2020. |
|
Percentages for Loan Forgiveness |
At least 75% for payroll related costs and no more than 25% on business operating costs could be calculated for loan forgiveness. |
At least 60% for payroll related costs and no more than 40% on business operating costs. The Borrower must use the proceeds at least 60% on payroll related costs in order to be eligible for ANY forgiveness. |
|
Deferral Period for Repayment of PPP Loans |
6 months. |
Loan deferral is until the date the loan forgiveness is remitted to the Lender.
The Borrower must apply for loan forgiveness within 10 months of the covered period (24 weeks from disbursement or December 31, 2020, whichever is earlier). If the Borrower fails to apply for loan forgiveness by that date, the Borrower must make payments no later than 10 months from the covered period. |
|
Secondary Market |
Any loans that were sold on the secondary market were subject to a 6 month deferral. |
Loan deferral is extended until the date the loan forgiveness is remitted to the Lender. |
|
Payroll Tax Deferral |
50% of payroll tax for the year 2020 is due December 31, 2021 and 50% is due December 31, 2022. The deferral did not apply to any Borrower that applied for PPP loan forgiveness |
The deferral applies to all employers regardless of applying or receiving PPP loan forgiveness. |