Back
Back
Back
Back
Back
Back
Back
Back
Back
Back
Back
Back
Back
Back
Back
Back
Back

PPP Flexibility Act of 2020

Written by: Kimberly A. Kramer

6/5/2020

On June 5, 2020, the President signed the Paycheck Protection Program (PPP) Flexibility Act of 2020.  The Act modifies the PPP prior guidance from the SBA is several ways and significantly improves the opportunity for forgiveness. 

1.     Expansion of the Forgiveness Period

The Act expands the period during which PPP funds may be spent in order to be eligible for forgiveness from eight (8) weeks to the earlier of (a) twenty-four (24) weeks from the loan origination date and (b) December 31, 2020.  Borrowers can also choose to use the original eight (8) week period. 

2.     Relaxed Use of Funds Requirements

Following enactment of the original legislation, the SBA issued guidance stating that to be eligible for forgiveness, at least 75% of the loan funds must be used to satisfy payroll costs.  The Act reduces the required payroll cost percentage to 60%. 

3.     Opportunities to Avoid the Headcount and Wage Reduction Forgiveness Penalties

Even if a borrower uses the PPP funds as required to be eligible for forgiveness, a reduction in employee headcount causes a reduction in the forgivable amount.  The percentage reduction is calculated by dividing the borrower’s monthly average full-time equivalent employees (“FTEs”) during the forgiveness period by its FTEs during the period from February 15, 2019 to June 30, 2019 or January 1, 2020 to February 29, 2020 (as the borrower elects).  A borrower is similarly subject to a dollar for dollar reduction in forgiveness based on wage reductions during the forgiveness period imposed on employees who earned less than $100,000 in 2019.

The original legislation provided a safe harbor if the borrower achieves equivalent FTEs and wages by June 30, 2020.  In acknowledgement of the continuing restrictions on business activities and the challenges of rehiring in the current environment, the Act moves the safe harbor testing date to from June 30, 2020 to December 31, 2020.

In addition, the Act provides additional opportunities to avoid the reduction in headcount penalty if the borrower documents an inability to (a) rehire individuals who were employees on February 15, 2020 and an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020 OR (b) return to the same level of business activity it was engaged in on before February 15, 2020 due to compliance with requirements for sanitation, social distancing, or safety related to COVID-19 issued by Health and Human Services, the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration.

4.     Extension of Maturity Date and Payment Deferral Period

The maturity date loan funds that are not forgiven is extended from two (2) years to five (5) for loans issued after the Act.  Loans previously issued may be modified subject to lender’s consent.  In addition, the payment deferral period was extended from six (6) months to the date on which the forgiveness amount is remitted to the lender.

If the borrower does not apply for forgiveness within ten (10) months after the last day of the forgiveness period, it is required to make a payment of principal, interest, and fees on the date ten (10) months after the last day of the covered period. 

Integrity and trust

At McLane Middleton we establish and maintain long-standing relationships with our clients to help us better achieve their unique goals over time. This approach to building trust requires that our esteemed lawyers and professionals use their broad, in-depth knowledge and work together with integrity to ascertain sound resolutions to legal matters for their clients.

Strength in numbers

McLane Middleton is made up of more than 105 attorneys who represent a broad range of clients throughout the region, delivering customized solutions. As a firm we are recognized as having the highest legal ability rating. The firm is rated Preeminent by Martindale Hubbell and is recognized as one of the nation's leading law firms in Chambers USA. Our attorneys are distinguished leaders in their respective practice areas.

Meet Our People

Commitment and collaboration

McLane Middleton's versatile group of attorneys and paralegals become trusted authorities on each case through collaboration. We work with our clients to learn their individual needs first and foremost and, together, we develop comprehensive solutions to their specific legal matters. This approach helps us exceed our clients' expectations efficiently and effectively, client by client, case by case.

Practice Areas

A history of excellence

McLane Middleton was established in 1919 in New Hampshire, and has five offices across two states. However, deep historical roots don't allow you to become innate. Our firm is organized, technological, and knowledgeable. Our history means we are recognized. But our reputation is built on the highest quality of service and experience in very specific areas of law.

The Firm

Intelligence paired with action

Our team continuously seeks opportunities to enhance their professional development and put key learnings to action. The pursuit of further insight guides us to volunteer service opportunities, speaking engagements, and teaching roles. Our lawyers are sought after thought leaders across their industries, and recipients of leadership awards throughout the region.