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By: Sara Bruce, Vice President of Legal Affairs
Matt Chacey, Staff Counsel
On Friday, June 05, 2020 President Trumped signed the Payroll Protection Program Flexibility Act (“PPPFA”) into law. The PPPFA is legislation designed to relax some of the previous requirements outlined by the CARES Act, the Small Business Administration, or the Department of Treasury. In a joint statement released Monday, Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza state that “the bill will provide businesses with more time and flexibility to keep their employees on the payroll and ensure their continued operations as we safely reopen our country.” That joint statement can be found HERE.
Additionally, the joint statement outlines the changes as the PPPFA takes effect. These changes include the following:
- Extends the period during which PPP loan funds may be used from 8-weeks to 24-weeks after the disbursement of the PPP loan, or up until December 31, 2020, whichever period ends earlier (borrowing period). Borrowers who received a PPP loan before the enactment of the PPPFA may elect to use an 8-week forgiveness period.
- Lowers the 75% requirement instead allowing employers to receive full forgiveness if at least 60% of the loan proceeds are used for payroll costs and at most 40% of the loan proceeds for non-payroll costs (rent, mortgage interest, and utilities) during the borrowing period. If a borrower uses less than 60% of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness.
- Provides a safe harbor from Full-Time Equivalent (FTE) reductions in loan forgiveness if employers are unable to:
- Return to the same level of business activity the business was operating at before February 15, 2020 due to compliance with requirements or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of HHS, the Director of the CDC, or OSHA, related to worker or customer safety requirements related to COVID–19.
- Rehire individuals who were employees of the borrower on February 15, 2020, and unable to hire similarly qualified employees for unfilled positions by December 31, 2020.
- Increases PPP loan maturity to five years if loan is approved by SBA (based on the date SBA assigns a loan number) on or after June 5, 2020.
- Extends the deferral period for borrower payments of principal, interest, and fees on PPP loans to the date that SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period).
- Confirms that June 30, 2020, is the last date on which a PPP loan application can be approved.
Dealers who wish to learn more about the changes outlined in the PPPFA should see:
- NADA’s updated Guidance, PPP Loans: Use of Proceeds and Forgiveness – HERE.
- Crowe’s article, Congress Passes Law Amending Paycheck Protection Program – HERE.
- Fisher Phillip’s article, Paycheck Protection Program Flexibility Act Provides Employers With More options (UPDATED) – HERE.
- Schneider Downs’ article, Paycheck Protection Program Expanded – HERE.
Dealers should also consult with their legal counsel and/or accounting professional to determine the impact on its PPP application and/or forgiveness and the best strategy given these new developments.
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