On June 11, 2020, the SBA and the Treasury Department released an interim final rule to reflect the changes to the Paycheck Protection Program (PPP) made by the Paycheck Protection Program Flexibility Act (PPPFA). This interim final rule changes key provisions of the April 2, 2020 interim final rule, such as the loan maturity, deferral of loan payments, and forgiveness provisions, and reiterates that SBA’s authority to guarantee PPP loans expires on June 30, 2020.

Maturity Date:

  • For loans made before June 5, 2020, the maturity is two years; however, borrowers and lenders may mutually agree to extend the maturity of such loans to five years.
  • For loans made on or after June 5, 2020, the maturity is five years.

Loan Forgiveness Covered Period:

  • For loans made on or after June 5, 2020, the loan forgiveness covered period is the 24 week period beginning on the date the loan was disbursed. 
  • For loans made before June 5, 2020, the Borrower can elect a loan forgiveness period of either the original 8 week or the extended 24 week period beginning on the date the loan was disbursed. 

Deferral of Loan Payments: 

  • As long as the Borrower submits a loan forgiveness application to the lender within 10 months after the end of the loan forgiveness period, then the Borrower does not have to make any payments of principal or interest until the SBA remits the loan forgiveness amount to the lender or notifies the lender that no forgiveness is allowed. The Lender must inform the Borrower when the first payment is due.
  • If the Borrower does not submit a loan forgiveness application within 10 months after the end of the loan forgiveness period, then the Borrower must begin repaying the loan after that 10 month period. 
  • Interest continue to accrue during the deferral period. 

Loan Forgiveness:

  • The 60% payroll cost requirement is a proportional limit on non-payroll costs as a share of the borrower’s loan forgiveness amount. It is not a threshold for receiving any loan forgiveness.
  • The interim final rule provides the following example: “For example, if a borrower receives a $100,000 PPP loan, and during the covered period the borrower spends $54,000 (or 54 percent) of its loan on payroll costs, then because the borrower used less than 60 percent of its loan on payroll costs, the maximum amount of loan forgiveness the borrower may receive is $90,000 (with $54,000 in payroll costs constituting 60 percent of the forgiveness amount and $36,000 in non-payroll costs constituting 40 percent of the forgiveness amount).

The SBA will also issue revisions to its interim final rules on loan forgiveness and loan review procedures to address amendments made by the PPPFA.

If you have any questions regarding the PPP loan program, please contact Berenzweig Leonard’s attorneys for additional information.

Stephanie Wilson is a Partner and Co-Director of Government Contracts at Berenzweig Leonard. She can be reached at [email protected]

DISCLAIMER: This article was written on June 12, 2020, and represents Berenzweig Leonard’s interpretation of the law and circumstances at the time of publication. As the situation surrounding the COVID-19 pandemic is changing on a daily basis, new or additional developments may impact matters discussed in this article. Please contact Berenzweig Leonard’s attorneys for up-to-date information.