In March 2020, Congress established the Paycheck Protection Program (PPP) to provide much needed relief to small businesses economically devastated by COVID-19. The PPP program (described in our April Alert) afforded small business owners the opportunity to apply for loans up to $10 million that would cover payroll, mortgage interest, rent, and utilities.
While many business owners utilized the PPP, many believed the PPP was flawed, particularly that the conditions for loan forgiveness were untenable for many businesses. Congress responded with the Paycheck Protection Program Flexibility Act (“PPPFA”), signed into law on June 5, which relaxes many of the key features of the PPP for employers. The PPPFA comes at a critical time, as many businesses begin to reopen, and provides businesses greater flexibility in implementing their reopening plans.
Businesses initially hesitant to apply for the PPP loan should review the PPPFA, and consider whether to apply for the loan, particularly since the deadline to do so expires at the end of June. Some of the key changes to the PPP are set forth below.
Extended Covered Period for Use of The PPP Loan
Initially, PPP loan recipients were required to use their loan proceeds within eight weeks from when they received PPP funds. As a result, many businesses were forced to accelerate spending when that spending wasn’t absolutely necessary. The PPPFA now extends the time period within which loan recipients must use their loan proceeds to twenty-four weeks, or until December 31, 2020, whichever occurs first.....