January 27, 2021

Volume XI, Number 27


January 26, 2021

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January 25, 2021

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Paycheck Protection Program Flexibility Act

On June 3, 2020 Congress passed the Paycheck Protection Program Flexibility Act (the “Flexibility Act”). Below are some of the highlights from the Flexibility Act:

  • Extending the Paycheck Protection Program (PPP) until December 31, 2020;

  • The extension includes extending the safe harbor for borrowers to rehire employees or reverse salary reductions from June 30, 2020 to December 31, 2020. The amount of forgiveness a borrower can receive will not be affected by a reduction in employees if the borrower can document:

    • an inability to rehire individuals who were employees of the borrower on February 15, 2020; and

    • an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020; or

    • borrower is able to document an inability to return to the same level of business activity as such business was operating at before February 15, 2020, due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration during the period beginning on March 1, 2020, and ending December 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19;

  • The “covered period” for loan forgiveness is extended from eight-weeks following the disbursement of the loan to the earlier of 24 weeks from loan disbursement or December 31, 2020. Any borrower who received a loan before the enactment of the Flexibility Act can elect to continue using the eight-week covered period;

  • The Flexibility Act reduces the 75/25 rule for use of loan proceeds. Borrowers are now allowed to use 60% of the loan for payroll costs and 40% for eligible nonpayroll costs;

  • The six-month deferral of payments due under PPP loans will be eliminated and replaced with loan deferral until the date on which the amount of loan forgiveness is remitted to the lender. If a borrower fails to apply for loan forgiveness within ten-months after the last day of the covered period for PPP loan forgiveness, the borrower must begin to make payments of principal, interest, and fees on its PPP loan;

  • Eligibility for a PPP loan will remain the same; expanding eligibility to nonprofits other than 501(c)(3) organizations was not included in this legislation;

  • Loan maturity is extended to five years and applies to PPP loans made on or after the enactment of the Flexibility Act. However, lenders and borrowers are not be prohibited from mutually agreeing to modify the maturity terms of prior-disbursed PPP loans; and

  • Lastly, the Flexibility Act removes the provision restricting employers who receive PPP loan forgiveness from deferring payroll taxes incurred between March 27, 2020 and December 31, 2020.

COPYRIGHT © 2020, STARK & STARKNational Law Review, Volume X, Number 156



About this Author

Rachel Lilienthal Stark Banking & Financial Services Attorney Stark & Stark Lawrenceville, NJ

Rachel Lilienthal Stark is a Shareholder and member of the Banking & Financial Services, Business & Corporate, Intellectual Property and Non-Profit Organization Groups. Ms. Stark concentrates her practice in the representation of start-up and emerging companies and non-profit organizations on a variety of issues including corporate formation, financing, franchising, licensing, acquisitions, executive compensation, equity compensation plans, employment agreements, real estate and intellectual property law. Ms. Stark also represents lenders in commercial loan transactions.


Dolores Kelley, Stark and Stark Law, Real Estate Lawyer, Zoning and Land Use Attorney, FDA Litigator

Dolores R. Kelley is a Shareholder and member of Stark & Stark’s Business & Corporate, Real Estate, Zoning & Land Use and Beer & Spirits Groups, where she concentrates her practice in the representation of start-up and emerging companies, breweries, distilleries, and non-profit organizations on a variety of issues including corporate formation, financing, licensing, acquisitions employment agreements and intellectual property law. Dolores also handles a wide range of matters for the real estate industry, including commercial transactions, leasing, condominium and homeowner...