Paycheck Program Flexibility Act Signed into Law and SBA Issues Updated Guidance

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  • Jun 18, 2020

On June 5, the President signed H.R.7010, the Paycheck Protection Program Flexibility Act (PPPFA), into law. The legislation modifies PPP loans and the terms of loan forgiveness to make them more favorable for borrowers.

The Paycheck Protection Program (PPP) Flexibility Act:

  • Extends the PPP loan forgiveness period to include costs incurred over 24 weeks after a loan is issued or through Dec. 31, whichever comes first. Businesses that received a loan before the measure’s enactment could keep the current eight-week period.
  • Extends to Dec. 31 from June 30 a period in which loans can be forgiven if businesses restore staffing or salary levels that were previously reduced. The provision applies to worker and wage reductions made from Feb. 15 through 30 days after enactment of the CARES Act, which was signed into law on March 27.
  • Maintains forgiveness amounts for companies that document their inability to rehire workers employed as of Feb. 15, and their inability to find similarly qualified workers by the end of the year. Under the modified measure, companies are covered separately if they show that they could not resume business levels from before Feb. 15 because they were following federal requirements for sanitization or social distancing.
  • Requires businesses to spend at least 60% of their PPP funds on payroll expenses to qualify for full loan forgiveness, instead of the current 75% rule.
  • Repeals a provision from the CARES Act that barred companies with forgiven PPP loans from deferring their payroll tax payments.
  • Allows borrowers to defer principal and interest payments on PPP loans until the SBA compensates lenders for any forgiven amounts, instead of the current six-month deferral period. Borrowers that do not apply for forgiveness would be given at least 10 months after the program expires to start making payments.
  • Establishes a minimum loan maturity period of 5 years following an application for loan forgiveness, instead of the current two-year deadline set by the SBA. That provision would apply to PPP loans issued after the measure’s enactment, though borrowers and lenders could agree to extend current loans.

On June 12, the Small Business Administration (SBA) and the U.S. Treasury Dept. issued new and revised guidance for the Paycheck Protection Program (PPP) to implement the changes detailed in the PPFA. They also issued an updated PPP borrower application form. The SBA guidance addressed a potential issue if a borrower used less than 60% of the loan amount for payroll costs during the forgiveness covered period, ensuring that they would still be eligible for partial loan forgiveness.

Impact on General Dentistry: AGD is pleased H.R.7010 has been signed into law and that PPP Loans will be more flexible for recipients. AGD supported the legislation, as PPP loans have been instrumental in providing dental practices with a line of support during the COVID-19 crisis.