The Small Business Administration and the Treasury Department signaled today that they will promptly issue rules and guidance implementing the new Paycheck Protection Program flexibility law that was signed by President Trump on Friday.
The new law extends the maturity period for unforgiven PPP loans approved on or after June 5, 2020 to five years. For previous PPP loans, the maturity period remains two years, but may be extended by mutual agreement of the lender and the borrower. The law also extends the forgiveness period for all PPP loans to 24 weeks from the date of origination and reduces the minimum amount that businesses must devote to maintaining payroll from 75% to 60% in order to receive forgiveness.
Importantly, SBA and Treasury noted that borrowers that use less than 60% of the loan amount for payroll costs during the forgiveness covered period will still be eligible for partial loan forgiveness, “subject to at least 60 percent of the loan forgiveness amount having been used for payroll costs.” The forthcoming rules and guidance will also establish various safe harbors from reductions in loan forgiveness based on reductions in full-time equivalent employees, among other things.