SBA PPP – PPP Flexibility Act*

The Paycheck Protection Program (PPP) Flexibility Act of 2020 updates several aspects of the SBA PPP. *

On June 5, 2020, the PPP Flexibility Act of 2020 (the Act) was enacted impacting aspects of the SBA PPP.

Key Developments

1. PPP loans made on or after June 5, 2020 shall have a minimum maturity of five (5) years rather than two (2) years. Borrowers with PPP loans originated prior to the Act may work with lenders to modify their terms to extend maturity from two (2) to five (5) years. Lenders are not obligated to extend the maturity.

2. The covered period for loan forgiveness eligibility has been increased from eight (8) weeks to twenty-four (24) weeks (or December 31, 2020, whichever is earlier) from the origination date of the PPP loan. Borrowers who received a PPP loan before June 5, 2020 may choose to continue to use the eight-week covered period timeline.

3. Loan forgiveness may be exempt from proportional reduction in the number of full-time equivalent employees if the borrower is able to document that it was (a) unable to rehire individuals who were employees on February 15, 2020 or hire similarly qualified employees for unfilled positions prior to December 31, 2020, or (b) unable to return to the same level of business activity before February 15, 2020 due to compliance with federal safety mandates or guidance in response to COVID-19.

4. To be eligible for forgiveness, all borrowers must use at least 60% of the PPP proceeds on payroll costs and may use up to 40% of the loan proceeds for authorized non-payroll purposes.

5. Principal and interest payments are deferred until the date on which the amount of loan forgiveness determination is remitted by the SBA to the lender. However, the borrower will be required to make payments ten (10) months after the end of the covered period if the borrower fails to apply for loan forgiveness up to that time.

6. The Act now permits borrowers to delay the payment of employer payroll taxes if all or a part of the PPP loan has been forgiven.

The full text of the PPP Flexibility Act can be accessed here.

The SBA continues to update its guidance and publish clarifying interim final rules. Please monitor for such updates here.

If you have any questions about this alert, please contact your Bank Leumi representative.

*This communication is for informational purposes only and is not legal advice. Please contact your legal
counsel for information related to how the PPP Flexibility Act impacts your business specifically.