Article Detail

News & Knowledge

Senate Passes the Paycheck Protection Program Flexibility Act

June 04, 2020

By: Mark Heimendinger, Nicole Cuccaro & Ferran Arimon

On Wednesday, June 3, the U.S. Senate passed the Paycheck Protection Program ("PPP") Flexibility Act (the "Act"). The Act was approved by the House on Thursday, May 28 and passed the Senate in a unanimous vote.

The Act passed the House and Senate amidst the realization that the one-size-fits-all structure of the PPP has been ineffective for many small businesses across the county. The Act aims to make certain changes to the PPP and is a standalone bill so that it may be pushed through without a delay.

The most significant portions of the Act have been summarized below:

Extension of Covered Period: Extended from 8 weeks to 24 weeks. This change should bring some peace of mind to small businesses who were concerned they would not be able to use all PPP funds in the 8-week period. The extension will allow more businesses to qualify for 100% PPP loan forgiveness.

75% Payroll Threshold Reduced to 60%: The Act changes the ratio of forgivable payroll costs to non-payroll costs from 75%/25% to 60%/40%. This change provides relief to businesses whose rent and utility cost are beyond 25% of their monthly expenses.

Additional Safe Harbor for Full-Time Equivalent Employees (FTEs) Rule: As discussed here, the PPP Loan Forgiveness application provides the following exceptions to the general rule that a reduction in FTEs will reduce the loan amount eligible for forgiveness. These exceptions apply to: (i) employees fired for cause, (ii) employees who voluntarily resigned, and (iii) employees who voluntarily requested and received a reduction of their hours.

The FTE Rule will also not apply if the borrower is able to document: (i) an inability to rehire individuals who were employed on February 15, and (ii) an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020.

The Act adds an additional exception and states that forgiveness shall be determined without regard to a proportional reduction in the number of FTE’s if the borrower in good faith:

"[i]s 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 issues 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 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"

Extension of Payroll Deferral Program: Prior to this Act, the IRS’ interpretation of the Payroll Deferral Program was that borrowers who have received a PPP loan will be permitted to defer deposit and payment of the employer’s share of Social Security tax that otherwise would be required to be made beginning on March 27, 2020, until the date the lender issues a decision regarding forgiveness. Employers may defer such payments without incurring failure to pay/deposit penalties.

Currently, amounts deferred up until getting notification that the loan is forgiven are paid 50% on December 31, 2021, and the remainder on December 31, 2022. Meaning, if a company finds out on September 30 that the loan is forgiven, any payroll taxes from before September 30 can be deferred, and any payroll taxes after September 30 have to be paid as normal. 

However, if the Act passes the Senate, borrowers will now be able to defer payment of their share of Social Security tax to December 31, 2021, and December 31, 2022, regardless of the forgiveness status of their loan.

PPP Loan Term Extended: Under the Act, the repayment term for the portion of PPP proceeds that are not forgiven has been increased from 2 years to 5 years. While the CARES Act originally provided for up to a 10-year term, Treasury and the SBA set the term at 2 years. Additionally, the grace period for repayment is extended from 6 months to 1 year. Borrowers will therefore not be required to make any payment on the loan until 1 year after the origination date.

The modifications to the PPP set forth in the Act are clearly borrower friendly. We encourage borrowers to review their expenditure plans in light of these latest modifications.

Be sure to visit our Coronavirus (COVID-19) Resource Center to keep up to date on the latest news.

This article is informational only. You should consult an attorney before acting or failing to act. The law may change rapidly and no warranty is given. LOWNDES DISCLAIMS ALL IMPLIED WARRANTIES AND WITHOUT LIMITATION, ANY WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. ALL ARTICLES ARE PROVIDED AS IS AND WITH ALL FAULTS. Consult a Lowndes attorney if you wish to establish an attorney/client relationship.

Getting the deal done requires flexibility, creativity, and efficiency. Clients and colleagues alike turn to Mark Heimendinger for his years of debt and equity finance experience, particularly in the commercial real estate and other asset-based arenas.

A seasoned pro who has seen the risks and iterations associated with both sides of a deal and all aspects of the capital stack, Mark understands that many contentious legal issues often mask a business concern – one that he likely has faced before. Even with the most complex and challenging negotiations, he is pragmatic, and focused on the client’s commercial goals.

Mark’s clients include issuers, borrowers, lenders, and underwriters. He has negotiated and executed a variety of transaction structures, including term and revolving credit facilities, public bond financings, public and private securitization transactions (including CMBS), mezzanine financing, equipment financing, 144A and Reg. D offerings, repo agreements, syndications, currency and interest rate cap and swap transactions, underwriting agreements, intercreditor agreements, joint ventures, and jurisdiction-specific non-recourse structures. Within the real estate space, Mark has covered multiple asset classes, including hotels and leisure facilities, office towers, senior living facilities, and multi-family residential buildings.

In addition to his Florida practice, Mark has years of both domestic and overseas “AmLaw 100” experience and has completed numerous cross-border transactions, mostly in the Asia Pacific region and in Europe.

Nicole Cuccaro concentrates her practice on real estate transactions, real estate development and commercial leasing. She assists a wide range of clients with the acquisition, disposition, leasing and financing of commercial real estate in the retail and hospitality industries.

Before she focusing her practice in the area of real estate law, Nicole handled a variety of commercial and corporate litigation matters and regularly represented lenders and business entities.


Ferran Arimon is an attorney in the firm’s Commercial Real Estate Group. He focuses his practice on commercial real estate transactions, including the acquisition, disposition, financing, development and leasing of various property types, as well as construction financings and re-financings. His practice also includes corporate and securities law.

Ferran regularly advises buyers, sellers, developers, landlords and tenants in real estate transactions related to multifamily developments, industrial properties, office buildings, shopping centers, restaurants, hotels, retirement communities and vacant land. He also assists clients with leasing contracts, title review and survey analysis, contract negotiation for purchase and sale, due diligence, negotiation of transfer documents and finalizing of transaction closings.

Additionally, Ferran has experience in corporate and securities law, mergers and acquisitions, and tax law. He has worked with clients to structure financing transactions in compliance with federal and state securities laws, having represented both public and private companies in mergers, acquisitions, capital raising, and corporate governance matters. He has also counseled clients on a broad range of tax issues and business planning issues from entity selection and formation to dissolutions.

Prior to law school, Ferran was an analyst at real estate investment management company in Miami. His role centered around underwriting, valuing, and identifying acquisition opportunities for distressed or value-add commercial and residential real estate acquired through joint ventures, direct Investments and non-performing loans portfolios.

Fluent in Spanish, Ferran regularly writes articles on a variety of emerging legal issues.

Ferran earned his law degree from the University of Florida Levin College of Law and his MBA from the University of Florida Warrington College of Business. Prior to law school, he received his undergraduate degree from Babson College, where he majored in finance and was a member of the men’s tennis team.

Meritas Law Firms Worldwide logo