Congress approves greater flexibility for PPP loans

On June 3, 2020, the Senate cleared legislation to provide greater flexibility to the Paycheck Protection Program (PPP).  The bill (H.R. 7010) was previously approved by the House and is expected to be quickly signed into law by the President.

The PPP Flexibility Act:

• Extends the PPP loan forgiveness covered period from 8 weeks after the loan’s origination date to the earlier of 24 weeks after the loan’s origination date or December 31, 2020. Borrowers who already have received a PPP loan have the option to use the new 24-week period or the original 8-week period.
• Increases the amount that can be spent on rent, mortgage interest, and utility payments to 40% of the loan, up from 25%. (The SBA will need to update its guidance to reflect this change to its original 75/25 rule.)
• Provides borrowers a “safe harbor” from the loan forgiveness rehiring requirement if the borrower is unable to rehire an individual who was an employee of the recipient on or before February 15, 2020, or if the borrower can demonstrate an inability to hire similarly qualified employees on or before December 31, 2020.
• Increases the terms of a PPP loan to 5 years for loans made on or after the date of enactment.
• Eliminates the exception in the CARES Act preventing taxpayers who receive PPP loan forgiveness from delaying the payment of employer payroll taxes.