By: Cristina N. Hyde, JD
Last Friday, President Trump signed H.R. 7010 into law. Otherwise known as the Paycheck Protection Program Flexibility Act of 2020 (the “Flexibility Act”), it is meant to amend provisions of the Small Business Act and the CARES Act so as to address concerns related to loan forgiveness under the Paycheck Protection Program.
The Paycheck Protection Program was meant to mitigate layoffs caused by COVID-19. As an incentive to maintain jobs, it offers low interest loans to small businesses. These loans could then be forgiven if employers agree to maintain their payrolls. However, issues with the legislation soon arose. Among them were concerns with the time allotted to spend the funds and the manner in which they were meant to be spent. Some began to worry that small businesses might be unable to comply and be left with crippling debt.
Although it is expected that there will be future revisions to the prior legislation, here are the changes made by the Flexibility Act, to date.
- It amends the minimum maturity period of a paycheck protection loan to 5 years, with the remaining balance after application for loan forgiveness.
- It extends the time a loan recipient has to spend the funds while still eligible for forgiveness to 24 weeks from the date of origination or December 31, 2020, whichever is sooner.
- It amends forgiveness rules; providing and exemption for those employers who can document an inability to
- Rehire pre-pandemic employees and an inability to hire “similarly qualified” employees for unfilled positions prior to December 31, 2020.
- Return to the same level of business activity due to compliance with public safety guidance and requirements related to coronavirus.
- It raises the portion of a forgivable loan that can be used on non-payroll business expenses to 40%.
- It revises the deferral period for paycheck protection loans.
- It repeals the portion of the CARES Act that made a paycheck protection loan recipient ineligible to defer payroll tax payments.
Overall, this is a step in the right direction for small businesses trying to recover from the financial devastation caused by COVID-19. However, there will be future revisions from both the Treasury Department and the Small Business Administration. Campanella Law Office will continue to follow this law and update clients regarding important guidance, revisions, and amendments. Meanwhile, if you have any questions, please Contact Us.