The Paycheck Protection Program Flexibility Act of 2020 (the “Flexibility Act”) was signed into law on June 5, revising a number of key requirements for loan forgiveness under the Paycheck Protection Program (“PPP”). The Program has provided support to a number of organizations negatively impacted by COVID-19 in the form of loans that can be forgiven if used for certain eligible expenses.
The Flexibility Act extends the period in which organizations can incur or pay for such expenditures and allows employers to avoid reductions in forgiveness amounts when they are unable to (i) rehire qualified employees or (ii) maintain prior employment levels due to operational changes resulting from the pandemic. The Act also reduces the amount of eligible expenditures that must be spent on payroll costs when seeking forgiveness from 75 to 60 percent.
Yet, as with most aspects of the Program to date, a number of outstanding questions remain regarding how the U.S. Small Business Administration (“SBA”) intends to implement these changes, particularly with respect to potential reductions in forgiveness amounts. The SBA has consistently deviated from the statutory framework that initially established PPP loans, so it would not be surprising if Congress’s revisions to the Program lead to additional unexpected changes at the regulatory level in the coming weeks.