Congress recently passed H.R. 7070, the Paycheck Protection Program Flexibility Act (“PPPFA”), which attempts to ease restrictions on the Paycheck Protection Program (“PPP”).
The PPPFA reduces the amount of the loan that needs to be spent on payroll from 75% to 60%, and therefore increases the amount of funds available for other uses (such as rent) from 25% to 40%. Some businesses’ rent exceeds 25% of their overhead, and rent is not normally abated even when revenues or activity decline. This change assists businesses with high rent or other eligible fixed costs. The PPPFA also extends the time businesses have to use PPP funds from eight weeks to 24 weeks after disbursement of the loan. H.R. 7070 at § 3(b). The PPPFA also extends the time for businesses to repay their PPP loans. Id. at §3(c). These changes provide businesses with significant additional flexibility in using PPP funds while still maintaining eligibility for forgiveness.
The PPPFA and recent regulations also provide flexibility in businesses employment practices. The PPPFA extends the deadline to rehire workers to December 31, 2020. The PPPFA further allows business owners to avoid this requirement (and the resulting loss of loan forgiveness) if they show that they could not rehire workers or reopen due to safety concerns. Lastly, the bill eliminates a previous loss of eligibility to defer payroll taxes for PPP participants.