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PPP Update: Paycheck Protection Program Flexibility Act Enacted by Congress

Laws and regulations are changing rapidly. After the publication of this article they are subject to change. Check back regularly for updates.

Late Wednesday evening (June 3, 2020), the U.S. Senate approved, by unanimous consent, major changes to the Paycheck Protection Program through the Paycheck Protection Program Flexibility Act, which was introduced and approved by the House of Representatives last week. President Trump is expected to sign the legislation immediately.

Highlights of the Paycheck Protection Program Flexibility Act:

  • Covered Period - Extends borrowers’ “covered period”, the time period it has to spend the PPP loan proceeds, from the original 8 weeks (56 days) from loan origination to the earlier of 24 weeks (168 days) from loan origination or December 31, 2020. For PPP loans dated prior to the effective date of the Flexibility Act, borrower may elect to keep the 8-week covered period.

  • Payroll Costs Percentage - Eases the requirements of how borrowers spend PPP proceeds by providing that at least 60% of the PPP loan amount must be used for payroll costs in order to receive forgiveness, and up to 40% of the PPP loan amount may be used for non-payroll costs. This expressly modifies the SBA’s guidance that at least 75% of the loan proceeds actually spent must be for payroll costs. So, the Act lowers the payroll costs percentage and frees up more PPP loan proceeds for non-payroll expenses (i.e., rent, utilities, mortgage interest), but it requires borrowers to actually spend at least 60% of the total loan amount on payroll costs, and the consequence for not doing so seems to be the forfeiture of forgiveness all together.

  • Rehiring Deadline - Extends until December 31, 2020 the time period for employers to rehire anyone laid off or furloughed after February 15, 2020, in order to avoid reduction in their loan forgiveness. The original CARES Act provided for a June 30, 2020 deadline.

  • FTE Calculation for inability to rehire - Statutorily adopts SBA guidance with respect to the full-time-equivalency (FTE) calculation in the forgiveness process by providing employers do not need to take into account in their FTE calculation during the covered period, employees that they were unable to rehire or replace, and are able to document those instances.

  • Maturity Date extension - Extends the maturity date for any unforgiven portion of a PPP loan from 2 years to a minimum of 5 years, but makes this provision only mandatory to loans applied for after the effective date of the Act. Existing PPP loans with a 2-year maturity date remain unchanged unless the lender and borrower mutually agree otherwise.

  • Interest Rate - Statutorily adopts the SBA’s determination that PPP loans accrue interest at a 1% annual rate.

  • Time frame to file forgiveness application - Extends the period for borrowers to seek forgiveness up to 10-months from the end of the borrower’s covered period.

While extending the covered period to 24-weeks and lowering the threshold of loan proceeds that must be spend on payroll costs to 60% should allow many participants in the program to “optimize” the amount of potential loan forgiveness, the changes do present some new challenges that borrowers should thoughtfully consider.  We will continue to closely monitor how SBA guidance responds to the Paycheck Protection Program Flexibility Act and offer our analysis.

PPP Update: Paycheck Protection Program Flexibility Act Enacted by Congress

Laws and regulations are changing rapidly. After the publication of this article they are subject to change. Check back regularly for updates.

Late Wednesday evening (June 3, 2020), the U.S. Senate approved, by unanimous consent, major changes to the Paycheck Protection Program through the Paycheck Protection Program Flexibility Act, which was introduced and approved by the House of Representatives last week. President Trump is expected to sign the legislation immediately.

Highlights of the Paycheck Protection Program Flexibility Act:

  • Covered Period - Extends borrowers’ “covered period”, the time period it has to spend the PPP loan proceeds, from the original 8 weeks (56 days) from loan origination to the earlier of 24 weeks (168 days) from loan origination or December 31, 2020. For PPP loans dated prior to the effective date of the Flexibility Act, borrower may elect to keep the 8-week covered period.

  • Payroll Costs Percentage - Eases the requirements of how borrowers spend PPP proceeds by providing that at least 60% of the PPP loan amount must be used for payroll costs in order to receive forgiveness, and up to 40% of the PPP loan amount may be used for non-payroll costs. This expressly modifies the SBA’s guidance that at least 75% of the loan proceeds actually spent must be for payroll costs. So, the Act lowers the payroll costs percentage and frees up more PPP loan proceeds for non-payroll expenses (i.e., rent, utilities, mortgage interest), but it requires borrowers to actually spend at least 60% of the total loan amount on payroll costs, and the consequence for not doing so seems to be the forfeiture of forgiveness all together.

  • Rehiring Deadline - Extends until December 31, 2020 the time period for employers to rehire anyone laid off or furloughed after February 15, 2020, in order to avoid reduction in their loan forgiveness. The original CARES Act provided for a June 30, 2020 deadline.

  • FTE Calculation for inability to rehire - Statutorily adopts SBA guidance with respect to the full-time-equivalency (FTE) calculation in the forgiveness process by providing employers do not need to take into account in their FTE calculation during the covered period, employees that they were unable to rehire or replace, and are able to document those instances.

  • Maturity Date extension - Extends the maturity date for any unforgiven portion of a PPP loan from 2 years to a minimum of 5 years, but makes this provision only mandatory to loans applied for after the effective date of the Act. Existing PPP loans with a 2-year maturity date remain unchanged unless the lender and borrower mutually agree otherwise.

  • Interest Rate - Statutorily adopts the SBA’s determination that PPP loans accrue interest at a 1% annual rate.

  • Time frame to file forgiveness application - Extends the period for borrowers to seek forgiveness up to 10-months from the end of the borrower’s covered period.

While extending the covered period to 24-weeks and lowering the threshold of loan proceeds that must be spend on payroll costs to 60% should allow many participants in the program to “optimize” the amount of potential loan forgiveness, the changes do present some new challenges that borrowers should thoughtfully consider.  We will continue to closely monitor how SBA guidance responds to the Paycheck Protection Program Flexibility Act and offer our analysis.

PPP Update: Paycheck Protection Program Flexibility Act Enacted by Congress

Laws and regulations are changing rapidly. After the publication of this article they are subject to change. Check back regularly for updates.

Late Wednesday evening (June 3, 2020), the U.S. Senate approved, by unanimous consent, major changes to the Paycheck Protection Program through the Paycheck Protection Program Flexibility Act, which was introduced and approved by the House of Representatives last week. President Trump is expected to sign the legislation immediately.

Highlights of the Paycheck Protection Program Flexibility Act:

  • Covered Period - Extends borrowers’ “covered period”, the time period it has to spend the PPP loan proceeds, from the original 8 weeks (56 days) from loan origination to the earlier of 24 weeks (168 days) from loan origination or December 31, 2020. For PPP loans dated prior to the effective date of the Flexibility Act, borrower may elect to keep the 8-week covered period.

  • Payroll Costs Percentage - Eases the requirements of how borrowers spend PPP proceeds by providing that at least 60% of the PPP loan amount must be used for payroll costs in order to receive forgiveness, and up to 40% of the PPP loan amount may be used for non-payroll costs. This expressly modifies the SBA’s guidance that at least 75% of the loan proceeds actually spent must be for payroll costs. So, the Act lowers the payroll costs percentage and frees up more PPP loan proceeds for non-payroll expenses (i.e., rent, utilities, mortgage interest), but it requires borrowers to actually spend at least 60% of the total loan amount on payroll costs, and the consequence for not doing so seems to be the forfeiture of forgiveness all together.

  • Rehiring Deadline - Extends until December 31, 2020 the time period for employers to rehire anyone laid off or furloughed after February 15, 2020, in order to avoid reduction in their loan forgiveness. The original CARES Act provided for a June 30, 2020 deadline.

  • FTE Calculation for inability to rehire - Statutorily adopts SBA guidance with respect to the full-time-equivalency (FTE) calculation in the forgiveness process by providing employers do not need to take into account in their FTE calculation during the covered period, employees that they were unable to rehire or replace, and are able to document those instances.

  • Maturity Date extension - Extends the maturity date for any unforgiven portion of a PPP loan from 2 years to a minimum of 5 years, but makes this provision only mandatory to loans applied for after the effective date of the Act. Existing PPP loans with a 2-year maturity date remain unchanged unless the lender and borrower mutually agree otherwise.

  • Interest Rate - Statutorily adopts the SBA’s determination that PPP loans accrue interest at a 1% annual rate.

  • Time frame to file forgiveness application - Extends the period for borrowers to seek forgiveness up to 10-months from the end of the borrower’s covered period.

While extending the covered period to 24-weeks and lowering the threshold of loan proceeds that must be spend on payroll costs to 60% should allow many participants in the program to “optimize” the amount of potential loan forgiveness, the changes do present some new challenges that borrowers should thoughtfully consider.  We will continue to closely monitor how SBA guidance responds to the Paycheck Protection Program Flexibility Act and offer our analysis.

PPP Update: Paycheck Protection Program Flexibility Act Enacted by Congress

Laws and regulations are changing rapidly. After the publication of this article they are subject to change. Check back regularly for updates.

Late Wednesday evening (June 3, 2020), the U.S. Senate approved, by unanimous consent, major changes to the Paycheck Protection Program through the Paycheck Protection Program Flexibility Act, which was introduced and approved by the House of Representatives last week. President Trump is expected to sign the legislation immediately.

Highlights of the Paycheck Protection Program Flexibility Act:

  • Covered Period - Extends borrowers’ “covered period”, the time period it has to spend the PPP loan proceeds, from the original 8 weeks (56 days) from loan origination to the earlier of 24 weeks (168 days) from loan origination or December 31, 2020. For PPP loans dated prior to the effective date of the Flexibility Act, borrower may elect to keep the 8-week covered period.

  • Payroll Costs Percentage - Eases the requirements of how borrowers spend PPP proceeds by providing that at least 60% of the PPP loan amount must be used for payroll costs in order to receive forgiveness, and up to 40% of the PPP loan amount may be used for non-payroll costs. This expressly modifies the SBA’s guidance that at least 75% of the loan proceeds actually spent must be for payroll costs. So, the Act lowers the payroll costs percentage and frees up more PPP loan proceeds for non-payroll expenses (i.e., rent, utilities, mortgage interest), but it requires borrowers to actually spend at least 60% of the total loan amount on payroll costs, and the consequence for not doing so seems to be the forfeiture of forgiveness all together.

  • Rehiring Deadline - Extends until December 31, 2020 the time period for employers to rehire anyone laid off or furloughed after February 15, 2020, in order to avoid reduction in their loan forgiveness. The original CARES Act provided for a June 30, 2020 deadline.

  • FTE Calculation for inability to rehire - Statutorily adopts SBA guidance with respect to the full-time-equivalency (FTE) calculation in the forgiveness process by providing employers do not need to take into account in their FTE calculation during the covered period, employees that they were unable to rehire or replace, and are able to document those instances.

  • Maturity Date extension - Extends the maturity date for any unforgiven portion of a PPP loan from 2 years to a minimum of 5 years, but makes this provision only mandatory to loans applied for after the effective date of the Act. Existing PPP loans with a 2-year maturity date remain unchanged unless the lender and borrower mutually agree otherwise.

  • Interest Rate - Statutorily adopts the SBA’s determination that PPP loans accrue interest at a 1% annual rate.

  • Time frame to file forgiveness application - Extends the period for borrowers to seek forgiveness up to 10-months from the end of the borrower’s covered period.

While extending the covered period to 24-weeks and lowering the threshold of loan proceeds that must be spend on payroll costs to 60% should allow many participants in the program to “optimize” the amount of potential loan forgiveness, the changes do present some new challenges that borrowers should thoughtfully consider.  We will continue to closely monitor how SBA guidance responds to the Paycheck Protection Program Flexibility Act and offer our analysis.

PPP Update: Paycheck Protection Program Flexibility Act Enacted by Congress

Laws and regulations are changing rapidly. After the publication of this article they are subject to change. Check back regularly for updates.

Late Wednesday evening (June 3, 2020), the U.S. Senate approved, by unanimous consent, major changes to the Paycheck Protection Program through the Paycheck Protection Program Flexibility Act, which was introduced and approved by the House of Representatives last week. President Trump is expected to sign the legislation immediately.

Highlights of the Paycheck Protection Program Flexibility Act:

  • Covered Period - Extends borrowers’ “covered period”, the time period it has to spend the PPP loan proceeds, from the original 8 weeks (56 days) from loan origination to the earlier of 24 weeks (168 days) from loan origination or December 31, 2020. For PPP loans dated prior to the effective date of the Flexibility Act, borrower may elect to keep the 8-week covered period.

  • Payroll Costs Percentage - Eases the requirements of how borrowers spend PPP proceeds by providing that at least 60% of the PPP loan amount must be used for payroll costs in order to receive forgiveness, and up to 40% of the PPP loan amount may be used for non-payroll costs. This expressly modifies the SBA’s guidance that at least 75% of the loan proceeds actually spent must be for payroll costs. So, the Act lowers the payroll costs percentage and frees up more PPP loan proceeds for non-payroll expenses (i.e., rent, utilities, mortgage interest), but it requires borrowers to actually spend at least 60% of the total loan amount on payroll costs, and the consequence for not doing so seems to be the forfeiture of forgiveness all together.

  • Rehiring Deadline - Extends until December 31, 2020 the time period for employers to rehire anyone laid off or furloughed after February 15, 2020, in order to avoid reduction in their loan forgiveness. The original CARES Act provided for a June 30, 2020 deadline.

  • FTE Calculation for inability to rehire - Statutorily adopts SBA guidance with respect to the full-time-equivalency (FTE) calculation in the forgiveness process by providing employers do not need to take into account in their FTE calculation during the covered period, employees that they were unable to rehire or replace, and are able to document those instances.

  • Maturity Date extension - Extends the maturity date for any unforgiven portion of a PPP loan from 2 years to a minimum of 5 years, but makes this provision only mandatory to loans applied for after the effective date of the Act. Existing PPP loans with a 2-year maturity date remain unchanged unless the lender and borrower mutually agree otherwise.

  • Interest Rate - Statutorily adopts the SBA’s determination that PPP loans accrue interest at a 1% annual rate.

  • Time frame to file forgiveness application - Extends the period for borrowers to seek forgiveness up to 10-months from the end of the borrower’s covered period.

While extending the covered period to 24-weeks and lowering the threshold of loan proceeds that must be spend on payroll costs to 60% should allow many participants in the program to “optimize” the amount of potential loan forgiveness, the changes do present some new challenges that borrowers should thoughtfully consider.  We will continue to closely monitor how SBA guidance responds to the Paycheck Protection Program Flexibility Act and offer our analysis.

PPP Update: Paycheck Protection Program Flexibility Act Enacted by Congress

Laws and regulations are changing rapidly. After the publication of this article they are subject to change. Check back regularly for updates.

Late Wednesday evening (June 3, 2020), the U.S. Senate approved, by unanimous consent, major changes to the Paycheck Protection Program through the Paycheck Protection Program Flexibility Act, which was introduced and approved by the House of Representatives last week. President Trump is expected to sign the legislation immediately.

Highlights of the Paycheck Protection Program Flexibility Act:

  • Covered Period - Extends borrowers’ “covered period”, the time period it has to spend the PPP loan proceeds, from the original 8 weeks (56 days) from loan origination to the earlier of 24 weeks (168 days) from loan origination or December 31, 2020. For PPP loans dated prior to the effective date of the Flexibility Act, borrower may elect to keep the 8-week covered period.

  • Payroll Costs Percentage - Eases the requirements of how borrowers spend PPP proceeds by providing that at least 60% of the PPP loan amount must be used for payroll costs in order to receive forgiveness, and up to 40% of the PPP loan amount may be used for non-payroll costs. This expressly modifies the SBA’s guidance that at least 75% of the loan proceeds actually spent must be for payroll costs. So, the Act lowers the payroll costs percentage and frees up more PPP loan proceeds for non-payroll expenses (i.e., rent, utilities, mortgage interest), but it requires borrowers to actually spend at least 60% of the total loan amount on payroll costs, and the consequence for not doing so seems to be the forfeiture of forgiveness all together.

  • Rehiring Deadline - Extends until December 31, 2020 the time period for employers to rehire anyone laid off or furloughed after February 15, 2020, in order to avoid reduction in their loan forgiveness. The original CARES Act provided for a June 30, 2020 deadline.

  • FTE Calculation for inability to rehire - Statutorily adopts SBA guidance with respect to the full-time-equivalency (FTE) calculation in the forgiveness process by providing employers do not need to take into account in their FTE calculation during the covered period, employees that they were unable to rehire or replace, and are able to document those instances.

  • Maturity Date extension - Extends the maturity date for any unforgiven portion of a PPP loan from 2 years to a minimum of 5 years, but makes this provision only mandatory to loans applied for after the effective date of the Act. Existing PPP loans with a 2-year maturity date remain unchanged unless the lender and borrower mutually agree otherwise.

  • Interest Rate - Statutorily adopts the SBA’s determination that PPP loans accrue interest at a 1% annual rate.

  • Time frame to file forgiveness application - Extends the period for borrowers to seek forgiveness up to 10-months from the end of the borrower’s covered period.

While extending the covered period to 24-weeks and lowering the threshold of loan proceeds that must be spend on payroll costs to 60% should allow many participants in the program to “optimize” the amount of potential loan forgiveness, the changes do present some new challenges that borrowers should thoughtfully consider.  We will continue to closely monitor how SBA guidance responds to the Paycheck Protection Program Flexibility Act and offer our analysis.

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