PPP Flexibility Act gives borrowers more time to spend loan funds and still obtain forgiveness

Payroll Protection Program Flexibility Act which was enacted earlier this month, amends the loan forgiveness provisions of the PPP Act by giving borrowers more time - 24 weeks instead of 8 weeks - to spend the loan funds and still obtain forgiveness. The Act also reduces the minimum amount required to be spent on payroll from 75% to 60% and with up to 40% of the loan amount to be used for mortgage interest, rent, or utility payments to obtain full loan forgiveness of that amount.

PPPFA has extended the date to replace full-time equivalent employees and restore salaries from June 30, 2020 until December 31, 2020 which provides relief for those businesses that have a loss of Full time equivalent employees it its workforce because of Covid-19 related restrictions that prevent the same level of business activity through the end of the year. Borrowers have been given flexibility, whereby they could obtain full forgiveness if there is a reduction in workforce based on the inability to find qualified employees or if they were unable to restore operations to Feb. 15, 2020, levels due to COVID-19 restrictions. These are in addition to previous guidance that let companies exclude workers who turned down good-faith offers of re-employment.

For the unforgiven portion of the PPP loan, the PPPFA also extends the repayment period to five years from the original two while retaining the original 1% interest rate in respect of loans made after June 5.

The Borrower can now apply for forgiveness of its Paycheck Protection Program (PPP) loan using SBA Form 3508. In the alternative the borrower could use SBA Form 3508EZ in any of the following  conditions -

The Borrower is a self-employed individual, independent contractor, or sole proprietor who had no employees at the time of the PPP loan application and did not include any employee salaries in the computation of average monthly payroll in the Borrower Application Form.

The Borrower did not reduce annual salary or hourly wages of any employee by more than 25 percent during the Covered Period or the Alternative Payroll Covered Period (as defined below) compared to the period between January 1, 2020 and March 31, 2020 and The Borrower did not reduce the number of employees or the average paid hours of employees between January 1, 2020 and the end of the Covered Period OR  the Borrower was unable to operate during the Covered Period at the same level of business activity as before February 15, 2020, due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020.