July 2020 Update on the Paycheck Protection Program under the CARES Act

This is an update on recent happenings regarding the Paycheck Protection Program (P3):

June 5, 2020 – Paycheck Protection Program Flexibility Act of 2020, Public Law No: 116-142 (Flexibility Act) was passed, amending portion of P3 to make it more flexible for borrowers, including:

• Extends the loan forgiveness use period of PPP loan proceeds from 8 weeks following funding to 24 weeks following funding or December 31, 2020, whichever is earlier.
• Rehire and restoration of salary date in order to avoid proportional reduction of loan forgiveness extended from June 20, 2020 to December 31, 2020, with new safe harbors provided if a borrower was unable to resume business activity to pre-COVID 19 levels due to compliance with regulatory requirements or guidance related to sanitation, social distancing or other worker or safety requirements, or were unable to rehire former or similarly qualified employees.
• Portion of PPP loan proceeds required to be applied to payroll costs in order to qualify for loan forgiveness decreased from 75% to 60% of loan proceeds. If less than 60% of proceeds are used for payroll costs, the forgivable portion of the loan will be reduced proportionately (i.e., the forgivable amount will be limited to 166.66% of the amount of proceeds actually spent on payroll costs).
• Increase repayment period for non-forgiven portion of loans from 2 years to 5 years, but only for loans approved on or after June 5, 2020 (lenders can agree to extend payment period of earlier PPP loans to 5 years as well).

The SBA issued additional regulatory guidance implementing the Flexibility Act in the form of six new Interim Rules posted between June 5 and June 25, 2020, as well as new loan forgiveness applications and instructions that take the Flexibility Act provisions into account.

June 30, 2020 – Original borrowing expiration date under P3, but more than $130 billion in allocated funds remained unused.

July 4, 2020 – Senate Bill S.4116 (Extend the Authority for Commitments for the Paycheck Protection Program and Separate Amounts Authorized for Other Loans under Section 7(A) of the Small Business Act) was signed into law, extending borrowing eligibility for qualifying first-time PPP borrowers from June 30, 2020 to August 8, 2020.

July 6, 2020 – As part of transparency about P3, the U.S. Treasury made public the names of borrowers that borrowed in excess of $150,000 under P3. SBA Paycheck Protection Program Loan Level Data

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