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Following last week’s passage of legislation to give businesses more flexibility in how they use their Paycheck Protection Program loans, the Treasury Department this morning said the government would updates to the regulations governing the program.

The Small Business Administration plans to issue new rules and guidance for lenders, along with a modified borrower application form, and a modified loan forgiveness application, to implement the new legislation. The principal changes involved include:

• Extending the window for loan forgiveness from eight weeks after the date of loan disbursement to 24 weeks after the date of loan disbursement, after businesses complained the eight-week window would have forced them to spend the money while still shut down thanks to public health restrictions in the wake of the COVID-19 pandemic.
• Lowering the requirements that 75 percent of a borrower’s loan proceeds must be used for payroll costs and that 75 percent of the loan forgiveness amount must have been spent on payroll costs during the 24-week loan forgiveness covered period to 60 percent for each use. If a borrower uses less than 60 percent of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness, subject to at least 60 percent of the loan forgiveness amount having been used for payroll costs.
• Providing a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees for borrowers that are unable to return to the same level of business activity the business was operating at before Feb. 15, due to compliance with federal public health and workplace safety requirements or guidance issued between March 1 and Dec. 31.
• Providing a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees, to provide protections for borrowers that are both unable to rehire individuals who were their employees on Feb. 15, and unable to hire similarly qualified employees for unfilled positions by Dec. 31.
• Increasing the maturity to five years for PPP loans approved by the SBA on or after June 5. The PPP program still has money available for borrowers, but June 30 remains the last date on which a PPP loan application can be approved
• Extending the deferral period for borrower payments of principal, interest and fees on PPP loans to the date that SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period).