Paycheck Protection Program Flexibility Act of 2020

The Equal Credit Opportunity Act’s 30-day requirement applies only if the applicant is a business with gross revenues of $1 million or less in its preceding fiscal year. Otherwise, the lender must notify the applicant in a reasonable period of time. A December 2022 report from the US House Select Subcommittee on the Coronavirus Crisis cited fintech firms and small business lenders such as Blueacorn, Womply, Bluevine, and Kabbage as among those that failed to help prevent fraudulent loans, which Insider suggested may jeopardize participation in future programs. The article cited Bloomberg News reporting that estimated fintechs “handled only 15% of PPP loans overall but accounted for 75% of the fraudulent PPP loans investigated by the Justice Department.” The U.S. Department of Justice charged more than 500 people with illegally claiming PPP loans, collectively totaling hundreds of millions of dollars.

Borrowers who received a PPP loan prior to the PPP Flexibility Act may elect for the covered period to end 8 weeks after the origination of the loan. The PPP Flexibility Act does not address whether new borrowers can apply for forgiveness prior to the end of the 24 week covered period. The CARES Act also provides that PPP loan forgiveness will be decreased in the event a borrower reduces, by more than 25%, the cash compensation of one or more employees who received no more than $100,000 in cash compensation on an annualized basis in all pay periods of 2019.

H.R. 6886 (116th): Paycheck Protection Program Flexibility Act of 2020

But it increases the amount that can be spent on non-payroll expenses from 25 percent (which was set by the SBA’s April 2, 2020 Interim Final Rule) of the total loan amount to 40 percent. In short, section 2302 of the CARES Act permits an employer to defer 50% of the employer’s share of social security taxes until December 31, 2021 and the remaining 50% to December 31, 2022. Rent payments are allowable if the business lease was first obligated prior to February 15, 2020.

• An applicant has to attach documentation to support the amount of the loan applied for, such as payroll reports, payroll tax filings, Form 1099-MISC, or a sole proprietor’s income and expenses.
• Loans can be made by existing SBA lenders, federally insured banks and credit unions, and other SBA approved lenders.
• The PPPFA allows borrowers who received a PPP loan before the date the PPPFA became law to keep the same eight-week “covered period” they had before enactment of the PPPFA if they so choose.
• Payroll costs also include the employer’s cost for health insurance benefits for its employees and retirement benefits for its employees, neither of which are counted against the $46,154 limit per employee.

Summary Of Paycheck Protection Program Flexibility Act to the Flexibility Act, Borrowers could avoid such reductions to their maximum forgiveness amount if they remedied such reductions by June 30, 2020. The Flexibility Act has now completely modified the covered period, extending such period to the earlier of 24 weeks after loan origination or December 31, 2020. Borrowers who received loans prior to the enactment of the Flexibility Act now have the option to either utilize the new 24-week covered period or to continue utilizing the original eight-week covered period. The Flexibility Act modifies these thresholds such that Borrowers may now spend up to 40 percent on permissible non-payroll costs, lowering the amount required to be used on payroll costs to 60 percent of loan proceeds. On June 5, 2020, the Paycheck Protection Program Flexibility Act of became law providing additional relief to borrowers under the Paycheck Protection Program . The PPPFA amends the original Coronavirus Aid, Relief, and Economic Security Act to loosen restrictions placed on small businesses that received PPP loans, making loan terms more favorable for borrowers.

Paycheck Protection Program Flexibility Act Eases PPP Rules

A tribal business is a business that is wholly owned by one or more Indian tribal governments or by a corporation that is wholly owned by one or more Indian tribal governments. Being partially owned by one or more Indian tribal governments also qualifies if all other owners of the business are either United States citizens or small businesses. A 38-year-old man in Irvine, California, had falsely claimed to be operating four businesses and had received about $5 million which he allegedly used to buy luxury cars. The Center for Countering Digital Hate identified PPP loans made to the National Vaccine Information Center, to Joseph Mercola’s online business group, to the Informed Consent Action Network, as well as to Robert F. Kennedy Jr.’s Children’s Health Defense. A total of $850,000 in loans was granted to some of the country’s most prominent anti-vaccination groups.

• Affiliation rules are waived for businesses in the hotel and food services industries, franchises in the Small Business Administration’s Franchise Directory, and businesses that receive financial assistance from small business investment companies licensed by the Small Business Administration.
• On June 11, Treasury Secretary Steve Mnuchin told the Senate Committee on Small Business and Entrepreneurship that PPP loan recipients’ names and loan amounts were confidential and would not be publicly released.
• At least 60% of the loan must be used on payroll costs (down from 75%) to be eligible for forgiveness.
• Under certain circumstances, a business that received a PPP loan is allowed to receive additional loan proceeds by way of a second draw.
• The bill would include eligible interest costs in the debt forgiveness calculation.