Congress Passes Paycheck Protection Program Flexibility Act

June 4, 2020

The U.S. Senate has passed the House’s version of the Paycheck Protection Program (PPP) Flexibility Act in support of small businesses who received PPP financial relief and now need more flexibility in its use. The bill will now be sent to President Trump, who is expected to sign it.

The time allotted for PPP loan recipients to spend the funds and still qualify for loan forgiveness has increased from eight weeks to 24 weeks. Current borrowers can choose to extend the eight-week period to 24 weeks or keep their original eight-week period. New PPP borrowers will have a 24-week period that cannot extend beyond Dec. 31, 2020.

Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness by Dec. 31, 2020. This is a change from the previous deadline of June 30.

Also, the threshold for the amount of PPP funds required to be spent on payroll costs to qualify for forgiveness is now 60 percent of the loan amount instead of 75 percent. However, borrowers must now spend at least 60 percent of funds on payroll or none of the loan will be forgiven.

The bill also includes new exceptions allowing borrowers to achieve full loan forgiveness even if they do not fully restore their workforce. Previous guidance already allowed borrowers to exclude from calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore operations to Feb. 15, 2020 levels due to pandemic-related operating restrictions.

In terms of repayment, new borrowers now have five years to repay their loan instead of two. Existing PPP loans can be extended up to five years if the lender and borrower agree to do so. The interest rate remains at one percent.

The bill also allows businesses that took a PPP loan to delay payment of their payroll taxes.