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Wednesday, June 10, 2020

Coronavirus Update 6–10–2020: President Trump signs Paycheck Protection Program Flexibility Act of 2020, extending PPP loan forgiveness


The Paycheck Protection Program Flexibility Act of 2020, which President Trump signed into law on June 5, makes several key business-friendly changes to the small business loans made under the CARES Act's Paycheck Protection Program.

Specifically, this Act:

  • Extends the "covered period" borrowers have to use PPP loans and qualify for loan forgiveness from the original eight weeks to the earlier of 24 weeks from loan disbursement or December 31, 2020. 
  • Extends until December 31, 2020, the CARES Act’s June 30, 2020, deadline to rehire employees and reverse salary cuts of more than 25 percent. 
  • Exempts borrowers from the reduction in loan forgiveness because of a reduction in employee headcount if the borrower is able to document in good faith that from Feb. 15 through Dec. 31, 2020, the borrower: (a) was unable to rehire employees who had been employed on Feb. 15 or hire similarly qualified employees for unfilled positions by December 31, 2020; (b) was unable to return to the same level of business activity at which the borrower was operating pre-Feb. 15 as the result of compliance with requirements, guidelines, standards for sanitation, social distancing, or other COVID-19 employee or customer safety issues. 
  • Lowers the threshold for the use of PPP loan funds for payroll purposes from 75 percent to 60 percent.
  • Allows for an agreed-upon extension of PPP loan repayment from two years to five years.
  • Eliminates the CARES Act's restriction on the deferral of payroll taxes for employers who receive PPP loan forgiveness.

As Suzanne Lucas (aka the Evil HR Lady) points out, this Act's biggest benefit might be the gift of time it gives to employers to staff up. "Hiring is always a difficult part of running a business, and the terms of the original PPP put pressure on companies to act quickly." She added, "If you don't need someone working yet, you can wait until you do need someone in the position."

Suzanne is correct. Even in the best of circumstances, hiring is time-consuming and difficult. The current circumstances are far from best, and businesses that took PPP money felt tremendous pressure to hire by June 30 to qualify for loan forgiveness. Employees hired in haste often lead to mistakes. These amendments offer significant relief through the benefit of added time.