Paycheck Protection Program Flexibility Act of 2020

Floor Speech

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Mr. ROY. Mr. Speaker, I would like to clarify the intent of some of the language in H.R. 7010, and especially the language in the Bill as to loan forgiveness.

Section 3 adds new paragraph 8 (Limitation on Forgiveness) that states that:

To receive loan forgiveness under this section, an eligible recipient shall use at least 60 percent of the covered loan amount for payroll costs, and may use up to 40 percent of such amount for any payment of interest on any covered mortgage obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation), any payment on any covered rent obligation, or any covered utility payment.

The intent of this provision is to reduce the portion of the forgivable amount that must be spent on payroll cost, to provide employers more flexibility to bring back and retain employees in a manner that allows compliance with state and local reopening restrictions and the business reality of individual borrowers.

The SBA, as set forth in the ``Interim Final Rule 1'' issued on April 2, 2020, has determined that the forgivable portion of the loan (that which is spent during the covered period) must be allocated at least 75 percent to payroll costs. In the event a borrower is unable to spend in that ratio during the covered period, the loan is eligible for partial forgiveness.

The IFR in section 2(o) states clearly that a PPP loan can ``be forgiven in whole or in part.''

o. Can my PPP loan be forgiven in whole or in part?

Yes. The amount of loan forgiveness can be up to the full amount of the full principal amount of the loan and any accrued interest . . . The actual amount of loan forgiveness will depend, in part, on the total amount [of payroll and non-payroll costs] . . . over the eight-week period following the loan . . . However, not more than 25 percent of the loan forgiveness amount may be attributable to non-payroll costs[.]

The overall spending of the loan is similarly limited in a 75/25 ratio. Section 2(r) states ``at least 75 percent of the PPP loan proceeds shall be used for payroll costs.''

The intent of this Bill is to retain the existing structure set forth by the SBA, but to amend the ratios in both IFR sections from 75/25 to 60/40 (along with extension of covered period, maturity date and other changes) to preserve borrower flexibility and the ability to obtain partial or proportional forgiveness of the loan if less than 60 percent of covered period expenditures are payroll costs, provided that the borrower must spend overall loan proceeds subject to the 60/40 ratio.

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