Earlier this month, the federal government passed into law the Paycheck Protection Program Flexibility Act of 2020 (“PPPFA”). This act modifies the Paycheck Protection Program (“PPP”) to better benefit businesses during the current COVID-19 shutdown crisis.

Given the continually changing legal landscape, we strongly encourage employers to reach out to Raimondo & Associates with questions regarding specific situations. We are closely monitoring these developments. Because of these frequent developments, and the need to adapt the general guidance below to specific circumstances, employers should consult counsel regarding specific circumstances.

At a general level, the legal rules and guidance we summarize below should not be applied in a manner that would prevent employers from taking reasonable, common-sense steps to protect the health and safety of employees, customers, vendors and their communities. There are many nuances and fact-specific elements that make individualized legal counsel on these questions of critical importance.

Q: Am I required to spend PPP funds within 8 weeks under the PPPFA? 

The PPPFA extends the time PPP recipients have to spend their funds from 8 weeks to 24 weeks. The PPPFA does not require businesses to wait for 24 weeks to apply for forgiveness; businesses may apply for forgiveness after 8 weeks if they prefer.

Q: How do I have to spend my PPP in order to qualify for loan forgiveness?

The PPPFA reduces the previous requirement to have Borrowers spend 75% of the PPP funds on payroll costs to qualify for full loan forgiveness down to 60%. This allows businesses to use up to 40% of their PPP loans for any payment of interest on any covered mortgage obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation), any payment on any covered rent obligation, or any covered utility payment. The list of forgivable expenses includes rent, mortgage payments, utilities, and interest on loans. However, it does not include spending related to inventory, personal protection equipment, nor expenses around remote working.

Q: Do I still have to rehire my employees by June 30, 2020? 

No; while the PPP previously required all workers to be rehired by June 30, 2020, in order for their salaries to count towards forgiveness, businesses now have until December 31, 2020, to rehire workers in order for their salaries to count towards forgiveness.

Additionally, the PPPFA states that a business can still receive forgiveness on payroll amounts if it: 

  1. Is unable to rehire an individual who was an employee of the eligible recipient on or before February 15, 2020;
  2. Is able to demonstrate an inability to hire similarly qualified employees on or before December 31, 2020; or 
  3. Is able to demonstrate an inability to return to the same level of business activity as such business was operating at prior to February 15, 2020, due to compliance with requirements established by the Secretary of Health and Human Services, the CDC, or OSHA during the period beginning on 1 March 2020 and ending 31 December 2020 related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety retirement related to COVID-19.

Q: Do I still have to repay any unforgiven portions of the PPP loan within 2 years? 

No, the PPPFA eases repayment terms for loans or portions of loans that are not ultimately forgiven. Businesses now have 5 years at 1% interest to repay loans, where previously businesses had only 2 years. Additionally, the first payment will be deferred for six months after the SBA makes a determination on forgiveness. The PPPFA also allows borrowers to take advantage of the CARES Act provision allowing deferment of the employer’s payroll taxes for Social Security. 

Q: When will the SBA begin accepting new applications for EIDL and EIDL Advances?

SBA is now accepting new applications for EIDL and EIDL Advance for all eligible small business and U.S. agricultural businesses. Applicants who have already submitted their applications will continue to be processed on a first-come, first-served basis.

“Agricultural businesses” includes those businesses engaged in the production of food and fiber, ranching, and raising of livestock, aquaculture, and all other farming and agricultural related industries (as defined by section 18(b) of the Small Business Act (15 U.S.C. 647(b)).

The SBA is encouraging all eligible agricultural businesses with 500 or fewer employees wishing to apply to begin preparing their business financial information needed for their application.