Congress Makes Changes to Paycheck Protection Program

Earlier this month, President Trump signed H.R. 7010, the Paycheck Protection Program Flexibility Act (PPPFA). The bipartisan bill relaxes rules governing the Paycheck Protection Program (PPP), increasing flexibility for loans that are originated under the PPP from this point forward. The bill extends the “covered period” during which businesses must expend their PPP funds, from eight weeks to 24 weeks—although recipients that received PPP loans before the enactment of the legislation may opt to retain the eight-week covered period. The legislation also reduces the proportion of funds that must be spent on payroll in order for the loan to qualify for forgiveness from 75 percent to 60 percent, allowing businesses greater flexibility when deciding how to expend their PPP funds. The legislation makes other changes to the CARES Act, striking a section that prohibited businesses that have their PPP loans forgiven to benefit from the payroll tax deferral provisions in the Act. The PPPFA also extends the loan deferral period authorized in the CARES Act to ten months from the end of the loan’s covered period. Finally, the PPPFA includes a minimum maturity of five years for newly originated PPP loans, and makes changes to exemptions in the CARES Act’s PPP forgiveness provisions to provide forgiveness for businesses that can prove in good faith that they were unable to meet the payroll requirements due to employee unavailability. These changes to the PPP follow two Interim Final Rules (IFRs) issued by the Small Business Administration (SBA) that went into effect May 28. These IFRs provided guidance on PPP Loan Forgiveness and SBA Loan Review Procedures, respectively.

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