New Amendment to PPP Loan Forgiveness terms
Insight Juan Zuniga · June 09, 2020
On June 5, 2020, the new Paycheck Protection Flexibility Act (“PPPFA”) entered into law which materially changed certain terms of the Paycheck Protection Program previously created under the CARES Act. The emphasis of the PPPFA is to ease the criteria that small business borrowers must comply with to have their PPP loans forgiven.
The key provisions of PPPFA include:
- The time period during which PPP funds must be spent on payroll to qualify for forgiveness has been extended from 8 weeks to 24 weeks after the origination of the loan. The outside date by which PPP funds must be spent to qualify for forgiveness has been extended from June 30, 2020 to December 31, 2020.
- The amount of forgiveness of a PPP Loan was previously subject to a proportional reduction if an employer’s headcount was less than the number of total employees as of February 15, 2020. The proportional reduction is now eliminated if the employer can document that
- It has been unable to rehire its previously furloughed or terminated employees as of February 15, 2020, and it has been unable to hire suitably qualified employees to fulfill such positions as of December 31, 2020 or
- The employer has been unable to return to the same level of business activity as of February 15, 2020 due to compliance with certain guidance from public authorities including HHS, CDC and OSHA.
- The percentage of PPP Loan proceeds that must be applied toward payroll and related expenses to qualify for forgiveness has been reduced from 75% to 60%, with 40% now being available to apply to rent, mortgage interest and utilities.
- The period for deferral of payments of interest for the portion of a PPP Loan that is not subject to forgiveness has been increased from 6 months to 1 year.
- The repayment period for that part of a PPP Loan that has not been forgiven has also been extended from 2 years to 5 years, applying the same 1% annual interest charge.
- The PPP originally required borrowers to resume paying the employer's share of the Social Security tax once their PPP loan was forgiven. Under the PPPFA, borrowers whose PPP loans are forgiven may now defer payment of the employer share of the Social Security tax through December 31, 2020. Deferred payments will be due in two equal installments in December 2021 and 2022.
Given these new changes, it is likely that the SBA will update the PPP Forgiveness Application made public in mid-May. Access the application here.
Juan E. Zúñiga is an international transactions attorney who has worked on cross-border deals throughout the United States, Latin America and in over 60 other countries. His practice is focused on buying and selling real estate, resort and hospitality transactions, mergers & acquisitions, overseas distribution agreements, international joint ventures, foreign trade and commerce, workouts of distressed assets, lending and investment issues. He has been particularly sought out for his handling of cross-border transactions, especially in Latin America. In this work, he represents American clients in their investments in overseas properties and in establishing subsidiary operations internationally. Additionally, he represents foreign clients in their investments in the United States. Read more about Juan here.
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