President Donald Trump has signed into law the Paycheck Protection Program (PPP) Flexibility Act, and CUNA’s CompBlog examines what it means for borrowers and lenders.

The bill is designed to give small businesses more time and flexibility to use PPP funds by modifying several CARES Act provisions related to loan forgiveness and payroll tax deferral for borrowers.

Changes to the PPP act from the legislation include:

• Extending the time a PPP borrower can apply for loan forgiveness up to the amount of PPP loan proceeds expended on authorized uses to 24 weeks after the disbursement of the PPP loan, but ending no later than Dec. 31, 2020;
• Expands the covered period that a PPP borrower must spend PPP loan proceeds to be eligible for forgiveness to either 24 weeks after loan origination, or Dec. 31, 2020 whichever is earlier;
• Amends the Small Business Act to revise the definition of “covered period” so the period is extended from June 30, 2020 to December 31, 2020 which means a potential borrower could apply for a PPP loan through December 31, 2020. Additional guidance on this is likely, as members of Congress have published a Letter of Congressional Intent stating that this extension of the covered period is not intended to permit SBA to continue to accept applications for PPP loans after June 30; Extending the maturity limit of the remaining balance on a PPP loan to a minimum of five years;
• Extending the maturity limit of the remaining balance on a PPP loan to a minimum of five years and for existing PPP loans allowing lenders and borrowers to mutually agree to amend these loans to conform to the new five-year term.
• Reduces the amount a PPP borrower must use for payroll costs to from 75% to 60% (further guidance is required to clarify whether this means that no amount will be forgiven if the borrower doesn’t use 60% of the PPP loan proceeds for payroll costs.
• Extending a safe harbor for PPP borrowers that restore employment or salary and wages to Dec. 31, 2020;
• Adding a new safe harbor providing for a PPP borrower to not have a reduction in loan forgiveness amount due to a cutback of full-time equivalent employee count if the borrower can document, in good faith:
  • An inability to rehire the same or similar employees that were in place as of Feb. 15;
  • An inability to hire similarly qualified employees for unfilled positions on or before Dec. 31, 2020; or
  • An inability to return to the same level of business activity before Feb. 15, due to COVID-related social distancing, sanitation, and other safety requirements or guidance from the Centers for Disease Control, Health and Human Services, or Occupational Safety and Health Administration issued between March 1, 2020, and December 31, 2020.
• Extending the deferral period for principal and interest payment amounts on any remaining post-forgiveness PPP loan balance to the time the forgiveness amount is remitted to the PPP lender by the Small Business Administration.

Additional details can be found in the CompBlog entry.