June 8, 2020
On June 5, 2020, the Paycheck Protection Program Flexibility Act (the “Act”) was signed into law. The Act provides greater flexibility to businesses that obtained loans under the Paycheck Protection Program (“PPP”) by:
- Extending the covered period during which a loan recipient may use PPP funds for certain expenses while remaining eligible for loan forgiveness from eight weeks to twenty-four weeks;
- Extending the deadline to rehire laid off or furloughed workers from June 30th to December 31st, 2020; and
- Extending the initial two-year loan term to five years.
The Act also increases the percentage of PPP loan proceeds that may be used on qualifying non-payroll costs from 25% to 40%. At the same time, however, the Act provides that PPP recipients must use at least 60% of the loan amount for payroll costs in order to receive forgiveness of a PPP loan. This represents a significant departure from the Small Business Administration’s PPP regulations, under which a failure to meet the prior 25% payroll-cost threshold did not completely disqualify a business from receiving forgiveness of a PPP loan.