The Paycheck Protection Program Flexibility Act of 2020 was passed by Congress and signed into law by the President recently. The PPPFA was passed in order to address a number of significant issues related to its progenitor, the Paycheck Protection Program. The original PPP program was a pillar of the landmark $2.2 trillion CARES Act aimed at helping small business owners and average Americans financially during the Coronavirus pandemic.
The PPPFA modifies the PPP program in significant ways, including changes to key deadlines, relaxing the rules governing loan forgiveness, and broadening the ways in which businesses can utilize the PPP loan funds.
Overview
The list below highlights some of the biggest modifications made to the PPP program with the passage of the PPPFA.
- The deadline for using PPP loan funds was extended from June 30, 2020, to December 31, 2020.
- Expands the eligible PPP loan forgiveness period from 8 weeks to 24 weeks, or until the end of 2020, whichever comes first.
- Drops the amount of loan funds that must be used toward payroll costs from 75 percent to 60 percent while still maintaining eligibility for full loan forgiveness.
- Extends the loan repayment period from two years to five years. However, this provision does not apply to PPP loans issued before the passage of the PPPFA. This means if you received a PPP loan in April or May, you are out of luck when it comes to the repayment period.
- Removes the penalty for businesses that do not maintain a pre-Coronavirus pandemic employee head count.
- Maintains loan forgiveness eligibility for business owners who made a good-faith attempt to retain their employees, but were ultimately unsuccessful because furloughed staff refused to return to work or accepted a different job.
- Gives borrowers 10 months to apply for loan forgiveness, commencing on the last day of their respective coverage period.
- Allows a borrower to defer principal payments, interest, and fees until a final decision has been rendered on their PPP loan forgiveness application between the lender and the Small Business Administration (SBA). This is an important reform, as lenders were given 60 days to review forgiveness applications while the SBA enjoyed another 90 days to make a final ruling on loan forgiveness. This amount of time expended on the application review meant some small business owners were having to start making payments on their PPP loan, even if that loan were to eventually be forgiven.
Have Questions or Concerns About the Impact of the PPPFA on Your PPP Loan? Speak to a Knowledgeable and Experienced Business Lawyer in Los Angeles
It seems like the rules and regulations governing PPP loans are in a constant state of flux, especially for a fledgling program that is only a few months old. The ever-changing regulatory environment surrounding PPP loans is a big reason why it is in your best interest to work with a knowledgeable business lawyer in Los Angeles to discuss the best way to manage your PPP loan funds, including the necessary documents to remain eligible for full loan forgiveness. For further information or to schedule a consultation, please call the highly experienced and reputable Afshin Hakim of Hakim Law Group, to schedule an appointment at 310.993.2203 or visit www.HakimLawGroup.com to learn more.