Relaxed and More Flexibility

Great news! Loans under the Paycheck Protection Program under the Coronavirus Aid, Relief and Economic Security (CARES) Act (“PPP”), and most importantly, the forgiveness requirements provisions have been somewhat relaxed as of this morning by passage of amendments to the PPP Act (“PPPFA”). The changes will give borrowers greater flexibility in how the funds can be spent and the length of time to spend the funds in order to get forgiveness of loan proceeds.

Borrowers now have 24 weeks from the disbursement of the loan to use the PPP funds, or until Dec. 31, 2020, when the program is now set to end. Borrowers can still use funds in the original eight-week period, but now it is not a requirement. The PPPFA also gives more flexibility in the amount of loan money that must be used for payroll purposes in order to get loan forgiveness, changing from the 75 percent requirement to now a 60 percent having to be spent on payroll costs, such as :

  • Salary, wages, commissions and tips of up to $100,000 annualized for each employee;
  • Employee benefits – paid leave, severance, insurance premiums, retirement benefits;
  • State and local taxes assessed on compensation;

The new 60% threshold provides that more funds may be spent on mortgage interest, rent, utilities and other costs. Employers must still accurately and thoroughly document use of PPP loan funds. And now, employers have until Dec. 31, 2020 to rehire employees who were laid off. Remaining from the original PPP requirements are exceptions to the rehire rule, which require ample documentation as to why employees were not rehired, for instance, making an employee the rehire offer and documenting the basis for the employee’s rejection. And PPP lenders are required to have the borrower/employer document the use of funds in order to obtain forgiveness. The U.S. Treasury Department and the U.S. Small Business Administration have provided additional guidance and rules. Feel free to contact us if you need this information from one of our last updates.

Also good news is that the PPPFA extends the maturity date of the portion of the PPP loan that must be repaid from two years to five years. Please review your loan terms though, if you already received your PPP loan, as the PPPFA does not change the loan terms. That being said, lenders are encouraged to work with the PPP borrowers and mutually agree to modify in writing the maturity terms of a PPP loan.

Next, the PPPFA also provides that an employer may be able to defer payroll taxes, even if the payroll at issue is part of the forgiveness portion of the PPP loan.

The goal of the PPPFA is to further assist employers to put into effect the CARES Act, to keep employees employed, to help cover payroll, utilities, rent and other qualified expenses, in order to prevent the economy from completely collapsing during the pandemic.

So, if you have not gotten a PPP loan yet, now may be the time to get it in order to bring back employees who were furloughed, laid off or whose compensation was reduced. There are requirements and considerations, which we discussed in a prior post, but call if you have questions.

For more information feel free to contact Dawn: dcoulson@eppscoulson.com

Epps & Coulson, LLP Attorneys

Admitted to practice in

California, New York, Colorado, Texas, Oregon, and Hawaii


Information contained in this Memo is intended for informational and educational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney. While intended as information and educational, it is considered advertising under applicable various laws of some states.