Paycheck Protection Program Flexibility Act Updates

New legislation extends application deadline for new PPP loans to August 8.

On July 4, 2020, the Paycheck Protection Program (PPP) deadline for new loan applications was extended to August 8, or until the remaining funds already appropriated by Congress—about $130 billion—are expended.

In June, the Small Business Administration (SBA) and the Department of the Treasury released revised interim final regulations following the enactment of the Paycheck Protection Program Flexibility Act (PPPFA). The interim final regulations clarified or changed certain PPPFA provisions that amend the original Paycheck Protection Program. The July 4, 2020 legislation provides further updates.

No New PPP Loans Issued After Remaining Funds Are Expended

The PPP's covered period is defined 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 the approximately $130 billion in remaining funds already appropriated are expended. (Previously, interim final regulations stated that no new loans would 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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