Paycheck Protection Program Flexibility Act of 2020

The Paycheck Protection Program Flexibility Act of 2020 (PPPFA) was signed into law June 5, 2020. The PPPFA addresses several aspects of the CARES Act, especially related to the Paycheck Protection Program (PPP) loans that limited its effectiveness in helping small businesses recover from COVID-19 closures. They relate primarily to conditions for loan forgiveness. Below are further details:

Extension of “covered period” for loan expenditures. The PPPFA extends the “covered period” for spending loan proceeds to be eligible for forgiveness from eight weeks from receipt of funds to 24 weeks or Dec. 31, 2020, at the latest.  

Deadline to restore number of full-time-equivalent employees (FTEs) for loan forgiveness extended to Dec. 31, 2020. Under the CARES Act, PPP loan forgiveness is reduced in proportion to the reduction in FTEs from Feb. 15, 2020, until June 30, 2020. The original June 30 deadline was unreasonable given the extension of state-mandated closures. For dental practices, the June 30 deadline was even more problematic due to personal protective equipment (PPE) supply shortages.

New exemptions to proportional reduction of loan forgiveness based on reduction in FTEs. The exemptions require documentation in good faith of:

  • An inability to rehire individuals employed on Feb. 15, 2020, or to hire similarly qualified employee by Dec. 30, 2020; or
  • An inability to return to the same level of business activity as before Feb. 1, 2020, due to Centers for Disease Control and Prevention, Occupational Safety and Health Administration or other federal requirements or guidances related to COVID-19.

Requirement that 60% of PPP funds be spent on payroll costs to qualify for forgiveness. This is important because it replaces recent Small Business Administration guidance that at least 75% of the funds must be spent on payroll costs to qualify for loan forgiveness.**

Loan payment deferral timing tied to loan forgiveness. To ensure that borrowers are not required to repay a loan before determination of forgiveness, the PPPFA defers repayment until: 1) the amount of forgiveness is determined; and 2) remitted to the lender. If a borrower does not seek forgiveness within 10 months of the end of the “covered period,” repayments begin at that time.

The PPPFA also extends the .minimum maturity date for new loans from two years to a minimum maturity of five years and permits renegotiation of existing loans to match.

AGD will continue to analyze the legislation and will update members on provisions that are of interest to general dentists

**PPP loans can be used only for the following four categories of expenses: payroll costs, including benefits; interest on mortgage obligations incurred before Feb. 15, 2020; rent under lease agreements in force before Feb. 15, 2020; and utilities for which service began before Feb. 15, 2020.