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PPP Amendment Details

May 28, 2020, the House of Representatives near-unanimously (417-1) passed HR 7010, the Paycheck Protection Program Flexibility Act. It is uncertain if the Senate will pass these measures, though there are clear indications of bipartisan support to relax the current terms of the PPP loan program.

Here are the key changes proposed in this bill:

  • Extend the loan application deadline from June 30 to December 31, 2020.
  • For new loans, the minimum loan term would be 5 years instead of the current 2-year term. For loans already made, banks and customers could agree to extend the term to 5 years.
  • Reduce the requirement that payroll costs must make up at least 75% of the loan forgiveness to 60%.
  • Extend the 8-week period in which costs incurred and paid can be forgiven to 24 weeks or December 31, 2020, whichever is earlier.
  • Extend the initial deferral period (months during which no payments are due) from 6 months to 10 months.
  • Changes are proposed to the calculation that lowers the amount of loan forgiveness stemming from a reduction in full-time equivalent employees (FTEs):
  • Employers would have until December 31, 2020, instead of June 30 to eliminate any reduction in FTEs that occurred between February 15 and April 26, 2020.
  • For offers to rehire furloughed workers that are rejected, employers will have until December 31, 2020, to hire a similarly qualified individual.
  • If borrowers can document an inability to return to their pre-February 15, 2020 level of business activity by December 31, 2020, because of compliance with federal guidelines related to sanitation, social distancing or other safety requirements related to COVID-19, there will be no reduction to the loan forgiveness due to a loss in FTE headcount. 

Allow deferral of employer Social Security taxes even if there is loan forgiveness.

Again, these changes must be considered and approved by the Senate and then signed by the President before they would become law. We expect the Senate to take up these and other considerations relative to the PPP very soon, as the 8-week period on many existing loans is now ending.

Unless you are certain that you will obtain full loan forgiveness, we recommend waiting to submit your application for forgiveness to see what changes are ultimately made.

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