On June 5, 2020, President Trump signed H.R.7010, the Paycheck Protection Program Flexibility Act of 2020 (the “PPPFA”). The PPPFA modifies the Paycheck Protection Program (“PPP”) to provide additional flexibility to borrowers in using PPP loan proceeds and obtaining forgiveness for their loans by the Small Business Administration (the “SBA”).

The PPP is a small business loan program established pursuant to Title I of the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act signed by President Trump on March 27, 2020, and supplemented by the Paycheck Protection Program and Health Care Enhancement Act (the “PPP/HCE Act”) on April 24, 2020.

Below is a high-level summary of the changes to the PPP set forth in the PPPFA. We expect the SBA and U.S. Department of Treasury to provide further implementing guidance and regulations in the coming days. Such guidance and regulations could provide further detail with respect to the usage and forgiveness mechanics for PPP loans and may materially change the summary below. Businesses are encouraged to seek advice from qualified legal counsel when obtaining and seeking forgiveness under a PPP loan.

1. Covered Period Extended to 24 Weeks.
   
   • The period during which all PPP loan funds must be spent to qualify for loan forgiveness (the “Covered Period”) is extended from eight weeks following the initial disbursement of funds to the earlier of 24 weeks following the initial disbursement or December 31, 2020.
   
   • Borrowers who take advantage of the extended covered period may still apply for loan forgiveness after eight weeks (using the eight-week covered period). Borrowers that elect to use the longer 24- week period will need to demonstrate compliance with the requirements to maintain employment levels through the entire 24-week period or to restore wage and full-time equivalent employee levels by December 31, 2020.
   
   
2. Amount of Loan Required to Be Spent on Payroll Reduced.
   
   • The amount of loan funds required to be spent on payroll expenses in order to qualify for loan forgiveness is reduced from 75% to 60%.
   
   • The remaining 40% may be spent on qualifying non-payroll expenses, which are unchanged from prior legislation and consist of rent, mortgage interest and utilities.
   
   
3. Deadline to Rehire Workers Extended.
   
   • A borrower’s loan forgiveness will not be reduced for any reduction in employees over the course of the Covered Period, as long as the borrower has rehired the same number of employees by December 31, 2020.
   
   
   • Rehiring Requirements Relaxed.
     
     • A borrower will not be penalized for failing to rehire employees in either of the following situations:
     
     
     • The borrower can document
       
       a) an inability to rehire an individual who was an employee on February 15, 2020, and
       
       b) an inability to hire a similarly qualified individual for this position by December 31, 2020.

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