President Signs PPP Reform Bill into Action

On June 3, the U.S. Senate passed the Paycheck Protection Program (PPP) Flexibility Act of 2020, H.R. 7010, by voice vote. Provided the chamber did not make any changes to the bill and it is identical to the version passed by the U.S. House on May 28. Today, the President signed the bill into action.

Among other things, the PPP Flexibility Act of 2020 does the following:

• Reduce the portion of PPP funds a business must spend on payroll expenses from 75% to 60% in order to qualify for loan forgiveness
• Extend the rehiring deadline to Dec. 31, 2020  
• Extend the time businesses have to spend PPP dollars from eight weeks to 24 weeks
• Extend the loan maturity period from 2 years to 5 years.
  • This applies only to PPP loans made after the date H.R. 7010 is signed into law (enacted). For PPP loans made before enactment of H.R. 7010, the bill indicates that nothing in this Act, the CARES Act (which created PPP) or the Paycheck Protection Program and Health Care Enhancement Act “shall be construed to prohibit lenders and borrowers from mutually agreeing to modify the maturity terms of a covered loan…”
• Allow businesses that secure a PPP loan to defer payroll taxes

The bill also allows borrowers to achieve full loan forgiveness even if they don’t fully restore previous workforce levels. An official summary of the bill states, “The forgivable amount must be determined without regard to a reduction in the number of employees if the recipient is [either] unable to rehire former employees and is unable to hire similarly qualified employees, or unable to return to the same level of business activity due to compliance with federal requirements or guidance related to COVID-19.”

The PPP Flexibility Act is an important step to addressing many of the concerns raised by small businesses and lenders and we are encouraged that Congress was quick to pass it in a bi-partisan manner. However, MCUL believes additional reforms are necessary, including a need to establish a reasonable dollar level under which PPP loans to the smallest businesses receive automatic forgiveness. MCUL, working with CUNA, will continue to advocate for changes to the program either as part of a potential Phase 4 emergency stimulus bill or a separate bill over the coming weeks and will keep you apprised of developments.