The Paycheck Protection Program Flexibility Act (PPPFA)

researching ppp on laptop

Signed into law on June 5, 2020, the Paycheck Protection Program Flexibility Act (PPPFA) is designed to address many concerns expressed by the business community regarding the Paycheck Protection Program.

Following the signing of the PPPFA, the SBA and Treasury issued a joint statement on June 8 with new information to further clarify any confusion. This article will take a look at some of the major changes resulting from the PPPFA and subsequent SBA/Treasury statement.

1. Spending period extended from 8 weeks to 24 weeks

First, the PPPFA provides for an extended amount of time during which recipients may spend their PPP loan fund. Initially limited to use within 8 weeks of receiving loan proceeds, the PPPFA extends this time period to 24 weeks.

As a result, employers can now use these funds throughout their reopening period. (Previously, many employers were limited to using these funds while still shut down due to shelter-in-place guidelines).

2. Required expenditure on payroll costs decreased from 75% to 60%

Second, the PPPFA lowers the amount participants must spend on payroll costs to 60% of allocated funds (originally 75%). But what if a loan recipient spends less than 60% on payroll? Will any of the loan be eligible for forgiveness?

In the SBA/Treasury joint statement, they clarified that it will be a sliding scale. If you use “less than 60 percent of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness, subject to at least 60 percent of the loan forgiveness amount having been used for payroll costs.”

Meaning, you can calculate your forgivable amount by taking the amount spent on “payroll costs” and dividing it by 0.6. Example: you received a $20,000 and $10,000 was spent on payroll costs. To calculate your forgivable amount,  you would divide $10,000 by 0.6. This will give you $16,666.67 forgiven and $3,333.33 repaid.

3. Loan repayment term extended from 2 years to 5 years

For PPP recipients with unforgiven loans, the PPPFA has extended the repayment term from two years to five years. However, the SBA/Treasury joint statement clarifies this increase. Per their guidance, the increase to five years extends to “PPP loans that are approved by SBA (based on the date SBA assigns a loan number) on or after June 5, 2020.”

This would appear to mean that if you have an unforgiven amount on a loan that was approved before June 5, 2020, you would be limited to the original two-year repayment period.

4. Relaxed requirements for returning to FTE levels

Next, the PPPFA addresses employer concerns about rehiring/recalling employees. Due to ongoing efforts to reopen business despite changing safety guidelines, employers now have until December 31, to return their staffing to previous levels.

Additionally, the PPPFA answers the common question of what to do if a former employee rejects an offer to return to work. Under the PPP Flexibility Act, employers can now still qualify for loan forgiveness if:

  • An employee rejects a rehire offer,
  • The business is unable to return to pre-pandemic levels of economic activity needed to rehire staff, or
  • The business cannot find qualified employees to hire.

Future Updates

PPP funds are still available for applicants for now. However, the SBA has set the final date for loan approval as June 30, 2020. We will continue to keep you updated on any additional amendments or adjustments as the coronavirus situation continues to unfold.

As always, we recommend staying as informed as possible on your state and local regulations to help keep your business and employees safe. If you’re preparing to reopen, consult our Return-to-Work Guide to test your business preparedness and review CDC guidelines for reopening your workplace.

Finally, if you have any questions or concerns, please feel free to contact us at (866) 946.2032 or by emailing our support team. And don’t forget to follow us on FacebookTwitter, and LinkedIn for even more Coronavirus and business updates!

Photo by Burst from Pexels

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