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Paycheck Protection Program Flexibility Act of 2020

Published:  June 9, 2020

Now that the Paycheck Protection Program Flexibility Act of 2020 was signed into law on June 5, 2020 by President Trump, companies may have questions about how to modify their approaches while staying in compliance. Royal is here to help with that.

This new act amends the original Paycheck Protection Program (PPP) by providing additional flexibility in how and when loan funds are spent while retaining the potential of full forgiveness. Changes under the new act include new extension periods, loan use requirement, payroll tax deferrals, loan forgiveness, and extension of repayment.

Under the new amendments, borrowers of the PPP loan now have 24 weeks to spend the funds provided to them by the loan, up from 8 weeks under the original act. To be eligible for full loan forgiveness for such funds, borrowers must spend at least 60% of the funds towards payroll cost, down from 75%. For borrowers who use less than the required 60%, partial loan forgiveness will remain as long as the loan is spent towards payroll costs. Furthermore, borrowers of these loans are able to defer payroll taxes as provided under the CARES Act with potential deferrals dates extended to 2022.

Additional extensions included under the act include the time period employers who have obtained a PPP loan must either rehire or eliminate positions to reduce their workforce. The new extension period grants an additional 6 months to employers with an end date of December 31, 2020. Moreover, extensions of repayment have been extended to 5 years, up from 2 years, from the minimum maturity date for the loan balance for loans made after June 5, 2020. Borrowers may also be able to defer loan payments until their debt forgiveness date has been determined. For borrowers who do not meet the requisites for loan forgiveness, the first loan payment will become due 10 months after the last day of the covered period.

The deadline to submit any PPP loan applications ends on June 30, 2020.

If you have any questions about the Paycheck Protection Program, or any other labor and employment law matters, please feel free to contact the attorneys at Royal, P.C. at 413-586-2288

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