Amendments to Paycheck Protection Program (PPP) Provide More Flexibility
Nathan Baugh & Emma Finerfrock
On Friday, June 5, 2020, the Paycheck Protection Program Flexibility Act (PPPFA) of 2020 was signed into law. This legislation relaxes requirements in the Paycheck Protection Program (PPP) and was passed in response to small business concerns about the requirements to qualify for loan forgiveness.
“I appreciate the Administration’s flexibility and commitment to address the bill’s [CARES Act] inadvertent technical errors that could create unintended consequences for small businesses as they seek forgiveness,” said U.S. Senator Marco Rubio (R-FL), Chairman of the Senate Small Business and Entrepreneurship Committee.
There is still roughly $100 billion of undistributed money in the PPP fund and the PPPFA has now extended the loan application deadline from June 30, 2020, to December 31, 2020. Rural Health Clinics (RHCs) that did not apply for a PPP loan may want to re-evaluate the opportunity. RHCs that already received PPP money should be aware of these changes as well.
In order to give confidence to small businesses and make it easier to meet the loan forgiveness requirements, Congress made the following changes:
- reduced the requirement to spend 75% of the PPP money on payroll to 60%;
- extended the time frame to spend funds from 8 weeks to 24 weeks; and
- pushed back the deadline to rehire employees from June 30th to December 31st.
Together, these flexibilities make it easier for PPP recipients, including RHCs, to bring back employees as needed. For instance, RHCs now have more time to staff back up as demand for outpatient healthcare services increases.
While the PPPFA changes improve the likelihood that businesses will qualify for full loan forgiveness, there is still a chance that the loan will not be forgiven or only partially forgiven if requirements remain unmet. In the event that full loans or portions of the loan are not forgiven, new PPP recipients will have 5 years (up from 2) to repay the loan. If a business received a PPP loan before this legislation was signed into law, they will not automatically qualify for this extended repayment period but they can negotiate changes to their maturity terms with their lenders.
For a full list of flexibilities added by the PPPFA click here.
Director of Government Affairs
National Association of Rural Health Clinics