Congress Passes Paycheck Protection Program Flexibility Act: Key Changes to PPP Program

The U.S. House of Representatives and U.S. Senate have passed H.R. 7010, the Paycheck Protection Program Flexibility Act of 2020, which modifies the Paycheck Protection Program implemented as part of the CARES Act.

H.R. 7010’s Key Changes to the Paycheck Protection Program

• Extending the “Covered Period” definition of the program from June 30, 2020, to December 31, 2020.
• Extending the period borrowers must use to spend the loan amount from eight weeks to 24 weeks, though borrowers whose loans originated prior to the enactment of HR 7010 may retain the original eight week covered period.
• Lowering the percentage of the loan amount that must be used for payroll costs from 75% to 60%, and making that percentage a prerequisite to any forgiveness. The remaining amount (up to 40%) may be used for mortgage payments (though not a pre-payment of principal), rent, and utility payments.
• Extending the maturity for loans originating after the enactment of H.R. 7010 to five years, with the caveat that borrowers whose loans originated prior to H.R. 7010 may modify their terms to extend the loan’s maturity date to five years.
• Modifying the requirement regarding rehiring employees so that businesses who were not able to do so have safe harbors if conditions and/or compliance with safety requirements relating to COVID-19 prevented them from reaching the same level of FTE’s as prior to COVID-19.
• Extending the deferral period for payments from six months following loan origination to the date on which the SBA transmits payment to the lender the amount of the loan that is forgiven (and 10 months after the last day of the applicable covered period if a borrower does not apply for forgiveness).

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