Paycheck Protection Program Flexibility Act— How it Changes PPP Guidelines

The Paycheck Protection Program Flexibility Act makes significant changes to the PPP in favor of small business borrowers. President Trump signed the Act Friday, June 5, with changes effective immediately— just in time for first-round borrowers to reap the benefits. 

How the PPP Flexibility Act Changes PPP Guidelines 

• Extends the “covered period” to use the loan funds from eight weeks to 24 weeks, but cannot extend past December 31.
• Removes the limits on loan forgiveness for borrowers unable to rehire employees, hire new employees, or return to the same level of business activity before the virus.
• Changes the 75/25 rule to a 60/40 ratio, allowing businesses to use up to 40% of the loan on non-payroll costs like mortgage interest, rent, and utilities. 
• Allows PPP loan borrowers to qualify for the Social Security tax deferral under the CARES Act.
• Extends loan repayment terms for unforgiven balances from two years to five years at 1% interest rate.
• Gives borrowers 24-weeks or until December 31 to restore workforce and wage levels.
• Allows borrowers to adjust FTE because they could not find qualified employees or were unable to restore business operations to pre-COVID-19 levels due to COVID-19 related operating restrictions.
• Extends the period for when a business can apply for loan forgiveness from within six months to within ten months of the last day of the covered period.
• Adjusts the loan repayment deferral period allowing recipients to defer payments until they receive compensation for forgiven amounts. Recipients who do not apply for forgiveness must begin making principal and interest payments no later than ten months after the last day of the covered period.