Changes Proposed to Paycheck Protection Program in Newly Passed House Bill

The U.S. House of Representatives earlier today passed H.R. 7010, the Paycheck Protection Program Flexibility Act of 2020, in a 417-1 bipartisan vote. The Senate may take up the bill next week. The bill provides for the following changes to the Paycheck Protection Program (PPP):

1. 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.
2. Extending the covered period for using PPP loan proceeds from June 30, 2020, to December 31, 2020.
3. Extending the covered period for PPP loan forgiveness from eight weeks from the date of origination to the earlier of 24 weeks from the origination date or December 31, 2020. A borrower who received a loan before the bill’s enactment could elect to continue using the 8-week covered period set forth in the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
4. Extending the deadline for the re-hire exception to forgiveness reduction in the loan forgiveness provisions from June 30, 2020, to December 31, 2020.
5. Providing that the amount of loan forgiveness will not be reduced by a reduction in the number of full-time equivalent 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.
6. Providing that at least 60 percent of PPP loan proceeds should be used for payroll costs to receive loan forgiveness (overturning the 75 percent standard set forth by the Small Business Administration (SBA) and U.S. Treasury Department).
7. Eliminating the six-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.
8. 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.

Except as stated in item #1 above, all the changes would be effective retroactively, as if included in the CARES Act originally.