Late last week, the House passed H.R. 7010, the Paycheck Protection Program Flexibility Act of 2020, in a 417-1 bipartisan vote. The Senate passed the bill late on June 3 with a unanimous vote.  The vote needed to be unanimous because the Senate is not officially in session. It will now go on to the President, who is expected to sign it. 

The bill should greatly increase the flexibility for borrowers. Here’s what it includes:

1. PPP borrowers can choose to extend the eight-week period to 24 weeks, or they can keep the original eight-week period. This flexibility is designed to make it easier for more borrowers to reach full, or almost full, forgiveness. Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by Dec. 31, 2020, a change from the previous deadline of June 30.
   
2. The minimum maturity of PPP loans was extended to five years. The repayment period was initially for two years.  This change would take effect on the date of the bill’s enactment and apply to any PPP loan made on or after such a date; however, lenders and borrowers would not be prohibited from mutually agreeing to modify the maturity terms of prior-disbursed PPP loans.  The interest rate will remain at 1%.
   
3. The bill allows businesses that took a PPP loan to also delay payment of their payroll taxes, which was prohibited under the CARES Act.
   
4. The bill provides that at least 60 percent of PPP loan proceeds should be used for payroll costs to receive loan forgiveness (overturning the 75 percent standard set forth by the Small Business Administration and U.S. Treasury Department).
   
5. The bill extends the deadline for the re-hire exception to forgiveness reduction in the loan forgiveness provisions from June 30, 2020, to Dec. 31, 2020.
   
6. The new bill provides that the amount of loan forgiveness will not be reduced by a reduction in the number of full-time equivalent employees, if, with respect to the period Feb. 15, 2020, to Dec. 31, 2020, the borrower is able to document in good faith (A) an inability to rehire employees who had been employed on Feb. 15, 2020, and an inability to hire similarly qualified employees for unfilled positions by Dec. 31, 2020, or (B) an inability to return to the same level of business activity at which the borrower was operating before Feb. 15, 2020, due to compliance with federal government requirements or guidance set forth between March 1, 2020, and Dec. 31, 2020, relating to standards of sanitation, social distancing, or other worker or customer safety requirements due to COVID-19.
   
7. The bill eliminates the six-month deferral of payments due under PPP loans and replaces it with deferral until the date on which the amount of forgiveness determined under the CARES Act is remitted to the lender. If a borrower fails to apply for forgiveness within 10 months after the last day of the PPP loan forgiveness covered period (i.e., the earlier of 24 weeks from origination or Dec. 31, 2020), the borrower must then begin to make payments of principal, interest, and fees on its PPP loan.

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Shawna L’Italien, a lawyer in the Salem office of Harrington, Hoppe & Mitchell, focuses on business law, estate planning, probate, elder law and real estate law. She can be reached at (330) 337-6586 or at slitalien@hhmlaw.com.