Banking and Financial Services e-Alert

Bowles Rice Health Care Banking and Financial Services e-Alert
New Paycheck Protection Program Flexibility Act
to Offer Some Relief for Borrowers

Yesterday, the Senate unanimously passed a bill to relax some of the restrictions under the Paycheck Protection Program (“Program”) to provide small business borrowers with more flexibility. The bill, known as the Paycheck Protection Program Flexibility Act, is now headed to the President’s desk for signature.

Under the bill, borrowers will have 24 weeks from the date of loan origination to spend the loan proceeds. However, the covered period cannot extend beyond December 31, 2020. Initially, borrowers were restricted to spending the loan proceeds in the eight weeks following the date of loan disbursement.

Additionally, borrowers are given more flexibility on restoring their workforce and wages to pre-pandemic levels. Under the legislation, borrowers have until December 31, 2020 to rehire their workforce and restore wages which are required for full loan forgiveness. Previously, borrowers only had until June 30, 2020. The bill also provides an exemption from reduction in loan forgiveness amounts if borrowers are unable to restore their workforce. If borrowers are unable to find qualified employees or are unable to restore business operations to February 15, 2020 levels due to COVID-19 related operating restrictions, they are still eligible for full loan forgiveness.

Under the new legislation, 60 percent of the loan proceeds must be spent on payroll expenses in order for the loan to be forgiven. Initially, the payroll expenditure requirement was 75 percent. However, if the payroll expenditure was under 75 percent of the loan amount, the loan forgiveness amount was to be reduced. Under the new legislation, if the borrower does not meet the 60 percent threshold, none of the loan is eligible for forgiveness.

Lastly, any new loans issued after enactment of this law will mature in five years as opposed to two years under the original legislation. Current loans that have already been disbursed are not automatically extended. However, the maturity date for those loans can be extended to five years by mutual agreement of the lender and borrower.

The full text of the bill can be found here.

Bowles Rice continues to closely monitor federal, state and local developments related to the novel coronavirus pandemic. Be sure to visit the COVID-19 Response Team page on our website for a comprehensive listing of available services.

For more information:
If you have questions about the Paycheck Protection Program Flexibility Act or would like more information, please contact one of the following Bowles Rice attorneys:

Sandy Murphy
contact by email

Julia Chincheck
contact by email

Seth Wilson
contact by email

Elizabeth Frame
contact by email

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