Last week, we issued a client alert discussing the Paycheck Protection Program Flexibility Act of 2020, which amended the CARES Act and provided Paycheck Protection Program (PPP) borrowers with additional flexibility during the loan forgiveness process.
This week, the Treasury Department and the Small Business Administration issued a joint statement discussing key provisions of the Flexibility Act and stating that new rules and guidance, a modified borrower application form, and a modified loan forgiveness application implementing these changes, would be issued promptly.
In addition, the joint statement clarified two issues created from the Flexibility Act’s language. First, despite the extension of the covered period under Section 1102 to December 31, 2020, the last day for a PPP loan application to be approved remains June 30, 2020. Given that more than $100 billion is still available under the program, eligible borrowers that have not received PPP loans should consider applying now, as their window to take advantage will soon end.
Second, although the new statutory language provides that “[t]o receive loan forgiveness under this section, an eligible recipient shall use at least 60 percent of the covered loan amount for payroll costs” the joint statement issued by Treasury and the SBA states that borrowers using less than 60 percent on payroll costs will still be eligible for partial loan forgiveness. Furthermore, the 60 percent rule will continue to be applied to the amount of loan forgiveness requested, even though the statute refers to the covered loan amount.
We are continuing to track PPP developments daily and will update clients as new guidance comes out. If you are interested in an arrangement for your specific PPP loan to help maximize potential forgiveness and minimize risk, please reach out to firstname.lastname@example.org to learn more.