On June 5th, Congress passed the Paycheck Protection Program Flexibility Act of 2020.  As we wrote in our June 6th HMA Blog posting, this new law includes the changes below.


Originally, businesses were required to spend and appropriately account for the PPP loan proceeds within 8 weeks. The new law extends that time period to 24 weeks.  This could make receiving loan forgiveness somewhat more likely.  The new law does not require businesses to wait for 24 weeks to apply for forgiveness.  They can still do so after eight weeks if they prefer.


Instead of requiring 75% of the loan proceeds to be spent on payroll related expenses, the new law reduces that amount to 60% which should help practices with high non-payroll overhead.


To obtain forgiveness, the original law required that all workers had to be rehired by June 30, 2020 for their salaries to count towards forgiveness. Under the new law, businesses now have until December 31, 2020 to rehire workers for their salaries to count towards forgiveness.


Since the purpose of the PPP loan was to keep people employed, to obtain forgiveness it required a business to demonstrate that it had the same number of FTEs during the look back period as it did during the comparative periods, or that it restored the number of FTEs by June 30, 2020. The only exception to this rule was if an employer could document in writing an attempt to rehire an employee who rejected this offer in writing. The new law extends the rehire date to December 31, 2020 and it adds some new additional exceptions for a FTE count.


For some borrowers, the new law increases the repayment terms of the portion of the loan that isn’t forgiven from 2 years to 5 years and defers the repayment and 1% interest charge until six months after the SBA makes a determination on forgiveness.


Many of these rules have been clarified over the past few weeks.  HMA consultants have been reviewing numerous articles and attending many webinars on this topic in order to determine the most effective loan forgiveness strategy for each of our clients.


The best presentation that we have seen detailing the new rules, including many examples, is from CohnReznick.  CohnReznick LLP is a national professional services firm headquartered in New York, NY with an office in Boston. According to their website, it is the eleventh largest public accounting firm in the United States based on aggregated 2017 revenues. 


Click here to review the slides from their webinar on June 24th.

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