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Congress Amends the Paycheck Protection Program

Published by Robert J Stillwell on June 16, 2020


The Paycheck Protection Program Flexibility Act was signed into law on June 5, 2020.  This law provides much needed flexibility and relief to small businesses, along with a more realistic timeline to get the help they need while they bring back employees. 

These revisions made to the PPP due to the Paycheck Protection Program Flexibility Act include the following:

  • Current PPP borrowers can now choose to extend the current 8-week “covered period” to spend the loan proceeds to 24 weeks, or they can keep the original 8-week period.  New PPP borrowers will have a 24-week covered period, but the covered period cannot extend beyond December 31, 2020.
  • Originally at least 75% of the SBA loan proceeds had to be spent on payroll costs to achieve full loan forgiveness. However, under the language in the Paycheck Protection Program Flexibility Act, the payroll expenditure requirement drops to 60% from 75% but now  borrowers must spend at least 60% on payroll or none of the loan will be forgiven.
  • Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be completed by December 31,2020.
  • Borrowers will now have the ability to achieve full loan forgiveness even if the workforce is not fully restored in the event the borrower cannot find qualified employees or good faith offers to rehire employees are rejected.  Also, if operations cannot be restored to February 15, 2020 levels due to COVID-19 operating restrictions.
  • For future borrowers only, the minimum term for loans has been extended from 2 to 5 years.  Terms for existing PPP loans can be extended up to 5 years if the lender and borrower agree.  The interest rate remains at 1%.
  • The deadline for applying for the new PPP loans has been extended from June 30, 2020 to December 31, 2020.
  • The restriction on PPP borrowers utilizing the CARES Act provision to defer payment of the employer share of the Social Security payroll tax through the earlier of the date of loan forgiveness or December 31, 2020 has been eliminated.  Employers with PPP loans can continue to defer this tax through December 31, 2020, which deferral is then payable 50% on December 31, 2021, and 50% on December 21, 2022. 

Stay up on updates due to new rules and regulations in this ever changing atmosphere.

* The above references are an interpretation of the Paycheck Protection Program Flexibility Act. Please refer to the government website for specific details. *

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