On June 3, 2020, the Senate approved the House-passed Paycheck Protection Program (PPP) Flexibility Act (H.R. 7010) with strong bipartisan support. This bill provides new flexibility to PPP borrowers in several key respects:

1. Borrowers can apply for a PPP loan up to December 31, 2020 (assuming PPP funding remains available).
2. Instead of an 8-week period to spend PPP funds, borrowers have a 24-week period after the PPP loan is approved or until the end of 2020 (whichever comes first) to spend PPP funds and qualify for loan forgiveness.

3. Providing that at least 60% of PPP loan proceeds should be used for payroll costs to receive loan forgiveness (overturning the 75% standard set forth by the Small Business Administration (SBA) and U.S. Treasury Department and increasing the 25% limitation on nonpayroll expenses qualifying for PPP loan forgiveness to 40%).
4. Extending the deadline from June 30, 2020, to December 31, 2020 to rehire employees and/or increase salary or wages to avoid reduction of costs because of a reduction in employee’s pay or reduction In FTEs.
5. Extending the minimum maturity of PPP loans to five years. This would take effect on the date of the bill’s enactment and apply to any PPP loan made on or after such a date; however, lenders and borrowers would not be prohibited from mutually agreeing to modify the maturity terms of prior-disbursed PPP loans.
6. Allowing all employers to take advantage of the CARES Act deferral of the 6.2 percent employer portion of social security payroll taxes, regardless of whether they have had a PPP loan forgiven.
7. Providing that the amount of loan forgiveness will not be reduced by a reduction in the number of FTE employees, if, with respect to the period February 15, 2020, to December 31, 2020, the borrower is able to document in good faith (A) an inability to rehire employees who had been employed on February 15, 2020, and an inability to hire similarly qualified employees for unfilled positions by December 31, 2020, or (B) an inability to return to the same level of business activity at which the borrower was operating before February 15, 2020, due to compliance with federal governmental requirements or guidance set forth between March 1, 2020, and December 31, 2020, relating to standards of sanitation, social distancing, or other worker or customer safety requirements due to COVID-19.
8. Eliminating the 6-month deferral of payments due under PPP loans and replacing it with deferral until the date on which the amount of forgiveness determined under the CARES Act is remitted to the lender. If a borrower fails to apply for forgiveness within 10 months after the last day of the PPP loan forgiveness covered period (i.e., the earlier of 24 weeks from origination or December 31, 2020), the borrower must then begin to make payments of principal, interest, and fees on its PPP loan.

If you are a small business owner and have questions regarding your PPP loan, please do not hesitate to contact us.

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Vasilios (“Bill”) J. Kalogredis is Chairman of Lamb McErlane’s Health Law Department. Bill has been exclusively practicing health law for over 40 years, representing physicians, dentists, group practices, other health care professionals and health care-related entities. bkalogredis@lambmcerlane.com. 610-701-4402

Rachel E. Lusk-Klebanoff is an associate in Lamb McErlane’s Health Law and Litigation Departments. She represents physicians, dentists, group practices, and other health care professionals and health-related entities in transactional, regulatory, and compliance matters. rlusk@lambmcerlane.com. 610-701-4416