Cavitch Familo & Durkin, Co., L.P.A.

House will vote on borrower-friendly changes to PPP

Michael Rasor

For two months, businesses have plotted their course through the PPP framework, outlined in the CARES Act.

Just as the 8-week periods for some loans end next week, the forgiveness rules could change significantly. Speaker of the House Nancy Pelosi has scheduled a vote next week on a bipartisan bill to make significant revisions to PPP loan terms. Each of the changes is borrower-friendly.

TheĀ Paycheck Protection Program Flexibility Act of 2020, introduced by Dean Phillips (D, Minn.) and co-sponsored by 4 Republicans, would do the following:

  • The covered period currently extends for 8 weeks, beginning on the date of loan origination.
    • The new bill would change the covered period to a span:
      • Beginning on the date of loan origination, and
      • Ending on the earlier of:
        • 24 weeks later, and
        • December 31, 2020.
    • However, a borrower who received a PPP loan prior to enactment of the PPP Flexibility Act may nonetheless opt to keep an 8-week covered period.
  • The 75%/25% rule is replaced by a 60%/40% rule, such that at least 60% of the forgiven sum must constitute payroll costs. However, this provision would be moot anyhow, if the covered period is changed to 24 weeks.
  • The CARES Act has a safe harbor of June 30, 2020 to re-hire or eliminate pay cuts. The bill would change it to December 31, 2020.
  • The headcount penalty will not apply to a given employee/position, if the borrower:
    • is unable to rehire an individual who was an employee of the eligible recipient on or before February 15, 2020;
    • is able to demonstrate an inability to hire similarly qualified employees on or before December 31, 2020; or
    • is able to demonstrate an inability to return to the same level of business activity as such business was operating at prior to February 15, 2020, due to compliance with Covid-19 related restrictions.
  • Loans would have a maturity of not less than 5 years. Currently, SBA has set maturity periods of 2 years.
  • The deferral of principal and interest will end at the earlier of (1) the date that the borrower submits a forgiveness application to its lender, and (2) ten months after the covered period ends.
  • PPP borrowers will be permitted to delay payments of payroll taxes, which is a provision of the CARES Act previously unavailable to PPP borrowers.

Our firm will be advising borrowers and lenders on forgiveness applications over the next several months. Contact me at for assistance.

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