For Financial Professional use only, not for use with the general public. ©2020 BILTD. All rights reserved. #20-0477-062221T

6 Things to Know About the Paycheck Protection Flexibility Act

Since the inception of the Paycheck Protection Program (PPP) under the historic CARES Act, a program largely designed to help small businesses owners retain and rehire employees during the coronavirus pandemic, more than $515 billion in approved loans have been distributed to small businesses across the country. As of June 20th, roughly $128 billion remained in the till. You may find the most up-to-date PPP Loan Report for Round 2 here: home.treasury.gov/system/files/136/SBA-Paycheck-Protection-Program-Loan-Report-Round2.pdf.

Originally, to be forgiven, the PPP loan was to be used to cover at least 75% in payroll expenses, with the remaining 25% for other non-payroll related expenses like utilities, mortgage interest, and rents. The original guidance required that the PPP loan be used to cover expenses over an eight-week period, ending no later than June 30, 2020.

However, the House introduced a bill on May 26 that was approved by the Senate on June 3, that allowed for more flexibility to the program. On June 5, 2020, the President signed into law the Paycheck

Protection Program Flexibility Act of 2020 (PPPFA). The Small Business Administration has been ordered to provide further guidance in the immediate future.

Here are six key things you should know about the Paycheck Protection Program Flexibility Act (PPPFA):

1. More time to use funds PPP borrowers may choose to extend the eight-week covered period to a 24-week period or until December 31, 2020, whichever occurs first. This change allows business owners more time to spend loan proceeds on qualifying expenses. However, no new PPP loans may be originated after June 30, 2020.

2. More spending flexibility to qualify for loan forgiveness The PPPFA drops the required 75% of payroll to qualify for loan forgiveness down to 60%, allowing for 40% (up from 25%) to be used to cover non-payroll related expenses. This change allows more flexibility in being able to qualify for loan forgiveness.

For Financial Professional use only, not for use with the general public. ©2020 BILTD. All rights reserved. #20-0477-062221T

3. More time to restore payroll Borrowers now have up until December 31, 2020, to rehire employees and/or bring wages back to 75% of pre-COVID-19 levels. Prior to the change, the deadline was June 30, 2020. The PPPFA also clarifies that loan forgiveness will not be reduced if an employer can prove that written offers to rehire were not accepted or there was an inability to find qualified workers to replace unfulfilled positions.

4. Longer maturity date for any portion of the loan not forgiven The PPPFA increases the maturity of any portion of the loan that is not forgiven to five years, up from the previous two years.

5. Delay of employer portion of Social Security taxes extended PPP loan recipients are permitted under the PPPFA to defer the payment of payroll taxes. In the former version, deferment was only permitted until the PPP funds were received. Timely deposit of employer Social

Security taxes are considered made if 50% is made on or before December 31, 2021, and the remaining amount no later than December 31, 2022.

6. Extension of loan deferral Repayment deferral of any portion of the loan that is not forgiven has been changed from six months to when the SBA reimburses the lender for forgiven amounts. However, repayment may be required if the borrower has not applied for forgiveness within 10 months of the expiration of the covered period of the loan.

For the newly revised loan forgiveness application including the changes made under PPPFA, including an EZ version for businesses with a single employee, visit https://home.treasury.gov/policy-issues/cares/assistance-for-small-businesses.

For additional guidance, visit the US Treasury’s Paycheck Protection Program resource page at: home.treasury.gov/policy-issues/cares/assistance-for-small-businesses or reach out to your PPP lender.

Sources:congress.gov/bill/116th-congress/house-bill/7010/texthome.treasury.gov/system/files/136/SBA-Paycheck-Protection-Program-Loan-ReportRound2.pdf