President Trump has signed the Paycheck Protection Program Flexibility Act of 2020 (the “Act”).
The Act makes several important revisions to the Paycheck Protection Program. It:
- extends the covered period to use funds for eligible expenses from 8 weeks to the earlier of 24 weeks or December 31, 2020;
- reduces the percentage of eligible expenditures that must be used on “payroll costs” from 75 percent to 60 percent (but the 60-percent requirement is a cliff requirement: if the borrower does not spend at least 60 percent of the loan proceeds on “payroll costs,” the loan forgiveness will be zero);
- delays the measurement date for the safe harbor on employee headcount from June 30 to December 31;
- increases the repayment term for any remaining loan after forgiveness from the 2 years to 5 years (but this will only apply to loans issued on or after the date of the Act, unless mutually agreed to by the borrower and the lender);
- provides an exemption from the loan forgiveness reduction related to employee headcount based on employee availability to fill open positions;
- provides an exemption from the loan forgiveness reduction related to employee headcount based on the inability to return to the same level of business activity as the business was operating at before February 15, 2020, due to compliance with requirements established or guidance issued by various government agencies related to COVID-19;
- changes the loan payment deferment period from the 6 months provided for in the Cares Act to the date on which the SBA remits payment to the lender for the loan amount forgiven;
- implements a filing deadline for the loan forgiveness application of 10 months from the end of the covered period; and
- provides that PPP borrowers are eligible to defer deposits of the employer Social Security tax on employee payroll through December 31, 2020.
The text of the Act may be found here. For legal advice specific to the operation of your Minnesota business, please contact us at Dunlap & Seeger, P.A.