Congress Passes the Paycheck Protection Program Flexibility Act

What This Means for Borrowers

The coverage period is extended!

Borrowers now have 24 weeks from the origination date (or until December 31, 2020, whichever is earlier) to utilize the funds for approved expenditures. This is a substantial increase from the initial eight-week coverage period. This flexibility allows companies that are still not fully operational time to bring back their workforce as the economy continues to progress through the various phases of re-opening.


An exemption has been provided from the reduction of forgiveness for inability to rehire at the same level of business activity before February 15, 2020.

Prior guidance had already given exemptions from the staff reduction for employees terminated for cause or for terminated employees that declined a written offer of rehire. The Flexibility Act adds a good faith exemption for employers that have an inability to rehire due to compliance with public health and safety standards related to COVID-19.


The non-payroll related covered uses are expanded, but there is a catch!

Previously, to obtain maximum loan forgiveness, at least 75% of the funds had to be used on payroll costs incurred and paid during the coverage period. Only 25% could be utilized on qualifying rent obligation payments, mortgage obligation interest, and covered utility payments. The new act now states that at least 60% must be used on payroll costs to be forgiven. This expands the ability to utilize the funds on non-payroll costs. As the law is written, if you cannot make the 60% threshold for payroll costs in the 24-week period, you will not be eligible for forgiveness on any amount of the loan.

We will be watching this issue closely as we hope lobbying will change this back to a proportional disallowance rather than a complete disallowance of forgiveness.


What if you have met all the requirements under the previous 8-week covered period and you just want to apply for forgiveness and move forward?

Anyone who received a loan before the enactment of this amendment to the program can elect to utilize the 8-week covered period.


Recipients of PPP loan forgiveness may also defer payment of the social security portion of payroll taxes.

This act allows companies who received forgiveness under the payroll protection program to also defer a portion of the company’s payroll taxes. Therefore, employers that have received the loan forgiveness will now be able to defer the 6.2% employer social security tax through December 31, 2020. Of this deferred amount, 50% will be payable on December 31, 2021, and the remainder on December 31, 2022.



PPP Loan Forgiveness Documentation Checklist