Corporate Law Blog

Payroll Protection Program Flexibility Act provides some latitude with loans

The Payroll Protection Program Flexibility Act (PPPFA) was signed into law on June 5, 2020. The Act is intended to address several concerns expressed by stakeholders regarding the Payroll Protection Program (PPP) that was introduced as a part of the Coronavirus Aid, Relief, and Economic Security Act passed on March 27, 2020.

The PPPFA modifies the PPP in these ways:

1. Rehire deadline moved to December 31, 2020: PPP conditioned loan forgiveness on employers rehiring or replacing employees who had been laid off during the pandemic by June 30, 2020. This deadline has been pushed back to December 31, 2020, due to concerns from the small business community about the feasibility of the June deadline. This change responds to increasing awareness that businesses may still not be legally able to operate at full capacity – or even at all – and the June deadline would put these employers in a position to pay employees when they weren’t working. The new December deadline allows more time for businesses to ease back into full operations and rehire or replace staff in a manner that suits business needs.
2. Ease in rehire requirements: The PPP originally required employers to rehire/replace up to the number of full-time employees or full-time equivalents by June 30, 2020, in order to avoid any reduction in the loan’s forgiveness. In addition to that deadline being moved back, employers can now rest assured that their loan forgiveness will not be reduced if they are unable to rehire someone who was employed before February 15, 2020; can show that they are unable to hire similarly qualified employees before December 31, 2020; and are able to show an inability to return to the same level of business activity as before February 15, 2020.
3. Reduction in amount required for payroll use: The PPPFA reduces the loan amount required to be used for payroll from 75% to 60, which provides greater flexibility in how funds are used.
4. Expanded time frame to use loan funds: The window during which borrowers may use funds has been expanded from eight weeks to 24 weeks. This change gives latitude to businesses who are better able to utilize payroll funds upon the re-opening of their business or industry.
5. Loan repayment extended from two to five years: The PPP originally required the loans (for amounts not forgiven) to be repaid within two years. The PPPFA allows for the repayment period to be extended to five years if both the borrower and lender agree. Additionally, the PPPFA extends the loan payment deferral period “until the date on which the amount of forgiveness determined under section 1106 of the CARES Act is remitted to the lender.’’

The PPPFA responds to stakeholder concerns, eases the requirements for full loan forgiveness, and provides flexibility to business owners while they are working to get their businesses back on solid footing in the aftermath of the COVID-19 pandemic. If you need assistance navigating the PPPFA’s new requirements, please contact your McBrayer attorney.

Anne-Tyler Morgan is a Member of McBrayer law.  Her law practice primarily focuses on politics, elections, and campaign finance, nonprofit institutions and associations, foster care and adoption, administrative law, healthcare law, pharmacy law and transactional healthcare and transactional agreements. Ms. Morgan can be reached at atmorgan@mcbrayerfirm.com or (859) 231-8780, ext. 1207. 

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This article does not constitute legal advice