Paycheck Protection Program amendments provide flexibility to employers

On June 5, 2020, President Donald Trump signed the Paycheck Protection Program (PPP) Flexibility Act. The loan program has been popular among companies trying to keep employees on the payroll during the COVID-19 crisis, but the rules made it not fully useful to many small borrowers. The amendment provides needed flexibility with a longer forgiveness period and a relaxed payroll expense requirement among the core changes.

Key changes

Borrowers can apply for a PPP loan through June 30, 2020 (assuming funding remains available). A letter to the Small Business Administration (SBA) from several key members of Congress emphasized their interest in not allowing new loan applications after June 30.

Originally, after receiving a PPP loan, borrowers had eight weeks to spend the funds and qualify for forgiveness. Under the amended law, they now have a 24-week period after the PPP loan is approved or until the end of 2020 (whichever comes first) to spend the funds and qualify for forgiveness. Borrowers who received their loan before June 5 can use the original eight-week period or choose the 24-week option.

The requirement to spend 75% of a PPP loan on payroll costs for maximum loan forgiveness has been reduced to 60%. To be forgiven, loan funds not spent on payroll must be used for business mortgage interest, rent, or utilities and can’t exceed 40% of the total forgiveness amount.