On June 5, 2020, President Donald Trump signed the Paycheck Protection Program Flexibility Act of 2020 (PPP Flexibility Act) into law. Several amendments provided for in the PPP Flexibility Act are retroactive to the date of enactment of the Coronavirus Aid, Relief and Economic Security Act (CARES Act). Given the retroactive nature of the PPP Flexibility Act and the approaching deadline to obtain a PPP loan (June 30, 2020), the Small Business Administration (SBA) and the Department of Treasury issued an Interim Final Rule (IFR) that clarifies the PPP Flexibility Act.
The PPP Flexibility Act reduces the amount of PPP loan proceeds that must be used for payroll costs in order to be forgivable. For a PPP loan to be forgiven in whole, businesses must use at least 60% of loan proceeds on payroll costs (rather than 75%) and may use up to 40% of loan proceeds for non-payroll costs. The IFR clarifies that this is a proportional limit on non-payroll costs as a share of the borrower’s loan forgiveness amount, rather than as a threshold for receiving any loan forgiveness. Therefore, a business that uses less than 60% of its PPP loan proceeds on payroll costs will still be eligible for partial loan forgiveness.
The rules surrounding PPP loans are complex and business specific. If you have concerns about the rules, please contact Ford Turrell, Timothy Hillegonds, Rob Davies, Matthew Crowe, Charlie Goode, Jeffrey Ott or your Warner attorney.