On June 5, President Trump signed into law the Paycheck Protection Program Flexibility Act which modifies certain provisions pertaining to the use and forgiveness of loans made under the Small Business Administration’s Paycheck Protection Program (PPP).
First, the Act extends the covered period for PPP loans from 8 weeks to 24 weeks from the date the loan is disbursed, meaning the loan proceeds can now be used during the extended period, or during the original 8-week period. Second, the Act allows up to 40% of the PPP loan proceeds to be used for non-payroll costs, such as rent and utility payments. This is an increase from the 25% ceiling initially set by the SBA rules governing PPP loans. Third, the Act extends the deferral period for re-payment of a PPP loan to the date on which the SBA pays the forgiven loan proceeds to the PPP lender, or, if no forgiveness is sought, to 10 months after the end of the 8-week or 24-week covered period. The Act also establishes safe harbors from reduction of loan forgiveness based on reductions in full time employees due to inability to rehire employees.
The SBA intends to promptly issue new guidance and a modified PPP Loan Forgiveness Application to reflect the new rules. A joint statement by the Treasury Secretary and the SBA Administrator explaining the new PPP loan forgiveness rules can be found here.
Christopher I. McCabe, Esq.
