June 9, 2020
By Caity Witucki
Contributing Editor, Hot Topic Tuesday
Hot Topic Tuesday — SBA and Treasury Issue Statement on the Paycheck Protection Program Flexibility Act
On June 8, 2020, SBA Administrator, Jovita Carranza, and U.S. Treasury Secretary, Steven T. Mnuchin, issued a joint statement regarding the implementation of the new Paycheck Protection Program Flexibility Act.
“We want to express our gratitude to Chairman Rubio, Ranking Member Cardin, Senator Collins, Congressman Roy, Congressman Phillips, and other members of Congress who have helped to create and guide our implementation of this critical program that has provided over 4.5 million small business loans totaling more than $500 billion to ensure that approximately 50 million hardworking Americans stay connected to their jobs,” says Carranza and Mnuchin. “This 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.”
The SBA and Treasury have indicated that they will provide updated guidance, a modified borrower application form, and a modified loan forgiveness application promptly. These modifications will implement the following important changes:
- Lower the requirements that 75% of a borrower’s loan proceeds must be used for payroll costs to 60%.
- Extend from 8 to 24 weeks the amount of time borrowers have to spend their loan funds while remaining eligible for forgiveness.
- Provide a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees for borrowers that 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.
- Provide a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees, to provide protections for borrowers that are both unable to 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.
- Increase to five years the maturity of PPP loans that are approved by SBA on or after June 5, 2020.
In addition, the new rules confirm that June 30, 2020, remains the last date on which a PPP loan application can be approved.