June.05.2020
The Paycheck Protection Program Flexibility Act of 2020 (the “PPP Flexibility Act”) was signed into law on June 5, 2020 (the “Enactment Date”). As summarized below, the PPP Flexibility Act makes certain Paycheck Protection Program (“PPP”) borrower-favorable amendments to the CARES Act, including, among others, expanding the loan forgiveness covered period and related changes. As discussed in our previous alert, certain of these amendments had been recommended to Congress and President Trump by restaurant industry leaders.
The PPP Flexibility Act makes the following PPP-related amendments to the CARES Act:
The PPP Flexibility Act provides an exemption with respect to the headcount reduction formula under the CARES Act. Specifically, the CARES Act limits the amount of expenditures otherwise eligible for forgiveness based on a reduction in average monthly full-time equivalent (“FTE”) employee headcount during the loan forgiveness covered period when compared with average monthly FTE employee headcount during one of two prior periods selected by the borrower.[2] The PPP Flexibility Act, however, provides that such a reduction in the forgiveness amount will not apply if, and to the extent, a borrower satisfies the following conditions in good faith:
We expect that the amendments under the PPP Flexibility Act will necessitate additional changes to SBA regulations, application forms, the SBA’s Frequently Asked Questions (FAQs) and other guidance.
[1] Borrowers that received PPP loans before the Enactment Date may nevertheless elect to retain the 8-week forgiveness period.
[2] A description of the headcount reduction provisions of the PPP can be found in our previous alerts.
[3] The PPP Flexibility Act also provides, however, that: “If an eligible recipient fails to apply for forgiveness of a [PPP] loan within 10 months after the last day of the [loan forgiveness] covered period . . . , such eligible recipient shall make payments of principal, interest, and fees on such [PPP] loan beginning on the day that is not earlier than the date that is 10 months after the last day of such [loan forgiveness] covered period.’’