Paycheck Protection Program Flexibility Act Updates

Revised interim final regulations do not allow PPP loans to be issued after June 30, 2020.

Following the enactment of the Paycheck Protection Program Flexibility Act (PPPFA), the Small Business Administration (SBA) and the Department of the Treasury recently released revised interim final regulations. The interim final regulations clarify or change certain PPPFA provisions that amend the original Paycheck Protection Program (PPP).

No New PPP Loans Issued After June 30

One important change defines the PPP's covered period as the time during which borrowers can use loan proceeds, but not as the time during which loans can be issued. This means that while the covered period was extended from June 30, 2020, to December 31, 2020, for using loan proceeds, no new PPP loans will be issued after June 30, 2020.

Other New Interim Final Regulations

  1. Maturity Date

    The new maturity date of PPP loans made on or after June 5, 2020, will be five years from the date of the loan. (Under the original PPP, loans that were not forgiven had to be repaid over two years.)

  2. Deferral Period

    The PPPFA extends the time during which borrowers may defer repayment. Borrowers must submit a loan forgiveness application within ten months after the end of the loan forgiveness covered period (the 24-week period beginning on the day the PPP loan is disbursed). Repayments will not need to be made until the SBA remits the loan forgiveness amount to the lender. For loans made prior to June 5, borrowers may choose to retain the original eight-week covered period for loan forgiveness.

  3. Loan Forgiveness

    The PPPFA overruled prior SBA guidance that required 75% of the loan proceeds to be used for payroll expenses. Under the new provision, in order to be eligible for full loan forgiveness, borrowers must use at least 60% of the loan proceeds for payroll expenses. Borrowers may use more than 60% of the loan proceeds for payroll expenses, but may not use less than that amount and still qualify for full loan forgiveness. The new interim final regulations clarify that if a borrower uses less than 60% of the loan proceeds for payroll expenses, the amount of loan forgiveness it is eligible for will be proportionately reduced.

The SBA may provide further guidance as needed. If you have any questions on the PPP, its related legislation or aspects of the CARES Act, please contact your local Mutual of America representative.

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