UPDATE
On Monday, June 8, 2020, Treasury Secretary Steven T. Mnuchin and Small Business Administration (“SBA”) Administrator Jovita Carranza issued a statement following the enactment of the Paycheck Protection Program Flexibility Act. The statement indicated that SBA, in consultation with Treasury, will promptly issue rules and guidance, a modified borrower application form, and a modified loan forgiveness application implementing these legislative amendments to the PPP.
In addition, the statement provided that “if a borrower uses less than 60% of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness, subject to at least 60% of the loan forgiveness amount having been used for payroll costs.” This is welcome news for borrowers, who were concerned about a potential “forgiveness cliff,” whereby none of their loan would be forgiven, if they failed to spend at least 60% of the loan amount on payroll costs.
On Friday, June 5, 2020, the President signed the Paycheck Protection Program Flexibility Act of 2020 into law during a White House event. The new law makes a number of borrower-friendly changes to the Paycheck Protection Program, including extending the covered period for borrowers to use loan funds, and easing restrictions on the use of loan proceeds, reductions for forgiveness and repayment terms. However, the legislation also contains a potential forgiveness cliff, whereby borrowers may not receive any loan forgiveness if they fail to spend at least 60% of their loan amount on payroll costs.
The following slides summarize the provisions of the new law. These slides are taken in part from our weekly Update on COVID-19 Relief Programs webinar held this morning, where our Partners, Tom Mazurek and Chuck Pezzino, discussed the latest developments related to the Paycheck Protection Program and other Federal and State relief measures, as well as answered attendee questions in a Q&A session.
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Click here to listen to the full recording of our June 5 webinar for more information on the new Paycheck Protection Program Flexibility Act of 2020.
See our post “House Passes Paycheck Protection Program Flexibility Act” from May 31, 2020 for additional details on this new law. It is expected that Congress will make further technical changes to the PPP and possibly this new legislation in the coming months, and we anticipate new guidance will be issued by the U.S. Small Business Administration and Department of Treasury in the coming days to address these changes.
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For the latest updates on Paycheck Protection Program and other relief programs, visit our COVID-19 Resource Center website to find more information and to register for our weekly webinars. If you have any questions, please contact your Tronconi Segarra & Associates advisor or a member of our response team at covid19team@tsacpa.com
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