New Paycheck Protection Flexibility Act Broadens Forgiveness Rules

On June 5, the Paycheck Protection Flexibility Act was signed into law improving the opportunity for many small businesses to benefit from the forgiveness provisions of the Paycheck Protection Program (PPP). The most notable provision of this new legislation increases the covered period for loan forgiveness from eight weeks to 24 weeks, providing borrowers more time to spend PPP loan proceeds, with the total of allowable spending during the covered period continuing to be eligible for forgiveness. Further, the period for use of loan proceeds has also been extended from June 30, 2020 to December 31, 2020, in order to allow all PPP loan recipients to benefit from the extended 24-week covered period for forgiveness.

Other important changes to the PPP program and CARES Act include:

  • Payroll expenditures under PPP may now be as low as 60% of the amount forgiven instead of 75%, allowing more flexibility to borrowers in how they use loan funds
  • Deadline for rehiring in order to avoid reduction in the potential forgivable amount of PPP loan extended from June 30, 2020 to December 31, 2020
  • Changes to the rehire requirements in order to maintain forgiveness under certain circumstances
  • Loan maturity dates for the unforgiven portion of a PPP loan extended from two years to five years and allowance of a further extension negotiated with the lender
  • Loan payment deferral is now six months from forgiveness determination date or, if no forgiveness application, ten months after covered period
  • Employer portion of Social Security tax deferral now allowed through December 31, 2020 for all PPP borrowers

There are already discussions under way that indicate additional changes or clarifications may be coming for the PPP. This could include more guidance on the impact of payroll costs on forgiveness, changes to the stated interest rate, and presumptive forgiveness for loans below a certain amount among other items. We will continue to monitor and share new information as it becomes available.

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SFA Partners is a family of companies focused exclusively on empowering independent financial advisors. SFA Partners includes The Strategic Financial Alliance (SFA), member FINRA/SIPC, a broker-dealer and investment adviser; Strategic Blueprint, a registered investment adviser; and SFA Insurance Services. Our wide breadth of services enables us to support a variety of advisor business models. Parent company, SFA Holdings, Inc. is owned by advisors, employees, and individual investors.