On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) into law. The Act created the Paycheck Protection Program (“PPP”), which allowed businesses with fewer than 500 employees to obtain forgivable loans of up to 2.5 times average monthly payroll costs, as defined in the statute.
While the Department of Treasury issued guidance addressing numerous questions and issues regarding eligibility for and the process to obtain a PPP Loan, many questions remained on the forgivability aspect of the loans. Late on Friday, May 15, 2020, the Department of Treasury posted a detailed PPP Loan Forgiveness Application that introduced new concepts into the loan forgiveness calculation. A week later, the Department of Treasury issued its Interim Final Rule on Forgiveness. As employers digested the application form and interim rule, rumors emerged of further significant changes to the forgiveness aspects of PPP loans.
Last week, Congress passed the Paycheck Protection Program Flexibility Act of 2020 (“PPPFA”), which was signed into law on June 5, 2020. The changes are favorable for borrowers.
The attached chart (below) highlights the key changes the PPPFA makes to the PPP. There is little doubt that the Department of Treasury also will issue additional guidance on the PPPFA.