Senate & House Pass Paycheck Protection Program Flexibility Act

The U.S. Senate passed the House version of Paycheck Protection Program (PPP) legislation Wednesday night, tripling the time allotted for small businesses and other PPP loan recipients to spend the funds and still qualify for forgiveness of the loans.

The Senate approval sends the House bill, called the Paycheck Protection Program Flexibility Act, to President Donald Trump, who is expected to sign it.

The highlights of this legislation include:

  • Currently PPP loans have an eight-week covered period (or alternative 8 week covered period) for payroll costs. There is now flexibility to extend that period to 24 weeks, which could provide a greater opportunity for borrowers to reach full forgiveness.
  • Using the 24-week period borrowers have the ability restore their workforce levels and wages to pre-pandemic levels by December 31, rather than the previous June 30 deadline.
  • Two new exceptions allow borrowers to possibly achieve full PPP loan forgiveness by allowing adjustments because they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020, levels due to COVID-19 related operating restrictions.
  • There is now a 60% cliff on payroll expenditure requirements. Borrowers must spend at least 60% of the loan on payroll costs for any of the loan to be forgiven. Previously borrowers were required to reduce the amount eligible for forgiveness if less than 75% of eligible funds were used for payroll costs.
  • The repayment period for any unforgiven portion of the loan has been increased from two to five years, with the interest rate remaining at 1%.
  • The bill allows businesses that took a PPP loan to also defer payment of certain payroll taxes, which was previously prohibited under the CARES Act.
  • The forgiveness application is due 10 months after the end of the covered period.