The significant changes made to the Paycheck Protection Program by the Paycheck Protection Program Flexibility Act (“PPPFA”), as supplemented by the Joint Statement and Seventeenth Interim Final Rule, are as follows:

• The PPPFA extends the period in which borrowers must spend loan proceeds for the purpose of calculating the loan amount that is eligible for forgiveness (“Loan Forgiveness Covered Period”).
  • The Loan Forgiveness Covered Period is either (i) twenty-four (24) weeks from the date of loan disbursement or (ii) December 31, 2020, whichever comes first.
  • Borrowers who received loans before June 5, 2020 may elect instead to use the eight (8) week period beginning on the date the PPP loan was disbursed as the Loan Forgiveness Covered Period. However, they are entitled to utilize the longer period described above if they so choose.

• The PPPFA extends the minimum maturity period for unforgiven loan balances.
  • For loans made before June 5, 2020, the maturity period is two (2) years, however, borrowers and lenders may mutually agree to extend this period to five (5) years.
  • For loans made on or after June 5, 2020, the minimum maturity is five (5) years.

• The PPPFA reduces the percentage of loan proceeds that must be spent on payroll expenses and clarifies that this is a not a threshold.
  • The amount of loan proceeds that must be spent on payroll expenses to qualify for forgiveness is sixty percent (60%).
  • This is a proportional limit on nonpayroll costs as a share of the borrower’s loan forgiveness amount and not a threshold for receiving any loan forgiveness.

• The PPPFA includes new safe harbors with respect to the PPP’s full-time equivalent  (“FTE”) and salary reduction rules.
  • Previously, borrowers had until June 30, 2020 to correct any reduction in employment, salary, or wages to avoid a reduction in forgiveness. The PPPFA extends this period to December 31, 2020.
  • If a borrower can document either of the following, the amount of its loan forgiveness will not be reduced as a result of a reduction in FTEs:
    • The borrower was unable to rehire former employees (who were employees as of February 15, 2020) or is unable to hire employees that are similarly qualified as of December 31, 2020, the loan forgiveness amount will not be reduced; or
    • The borrower was unable to return to the same level of business operations as before February 15, 2020 due to requirements or guidance issued by HHS, the CDC, or OSHA between March 1, 2020 and December 31, 2020 relating to standards for sanitation, social distancing, or any employee/customer safety requirement resulting from COVID-19, borrowers will not be penalized for a decline in their FTE count.

• The PPPFA extends the payment deferral period.
  • Under the new rules, the deferral period begins on the date on which the amount of forgiveness is remitted by the lender (rather than the date of the loan disbursement).