- The period during which the use of PPP Loan proceeds qualifies for forgiveness will be extended from 8 weeks to 24 weeks (borrowers who have already received their PPP Loans may elect to use the 8-week period, if desired, allowing the borrower to apply for forgiveness sooner).
- The requirement that 75% of the forgivable PPP Loan proceeds must be used for payroll costs will be reduced to 60%. The PPP Flexibility Act appears to make this an “all-or-nothing” requirement, such that if less than 60% of the total PPP Loan proceeds are used on payroll costs, no portion of the PPP Loan would be eligible for forgiveness.
- The minimum loan term for any PPP Loans awarded after the effective date of the PPP Flexibility Act will be five years. For existing PPP Loans, the current loan maturity is two years; however, lenders and borrowers can modify the terms of existing loans to be consistent with the PPP Flexibility Act.
- The deadline to restore employee and wage reductions to avoid reductions to the PPP Loan forgiveness amount will be extended from June 30, 2020, to December 31, 2020.
- If a borrower attempts, but is unable, to rehire individuals who were employees as of February 15, 2020, and is unable to hire similarly qualified employees for the unfilled positions on or before December 31, 2020, such employee reductions will not impact the borrower’s loan forgiveness calculation if the borrower maintains documentation of such attempts. Further, a borrower’s loan forgiveness calculation will not be reduced by a reduction in headcount if the borrower is able to document an inability to return to the same level of business activity it was operating at before February 15, 2020, due to compliance with mandatory federal, state, and/or local guidelines.
- Payments on the portion of a PPP Loan that is not forgiven will be deferred until the final forgiveness amount is remitted to the lender by the SBA; however, if a borrower does not apply for loan forgiveness within 10 months after the end of its 24-week period, the borrower will be required to start making payments on such date.
- Borrowers who have PPP Loan proceeds forgiven will be able to continue to defer 2020 employer payroll taxes.
With the exception of the 5-year loan term, the foregoing changes will be retroactively effective as of March 27, 2020. More detailed information regarding PPP Loans and the forgiveness application process can be found on our website and on the SBA’s website.
The Business and Corporate attorneys at Dvorak Law Group have the knowledge and experience to efficiently assist our clients with financing needs. Please contact Dvorak Law Group for specific questions and recommendations regarding your business.
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