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Paycheck Protection Flexibility Act Passed by Congress


PPP loan forgiveness just got a lot easier thanks to the Paycheck Protection Flexibility Act passed by Congress. This new law gives small businesses more flexibility and more time to use the popular PPP loan. This new flexibility will in turn result in an easier route to qualifying for complete loan forgiveness.


December 31, 2020 is the new deadline to spend loan proceeds. When the PPP program rolled out this spring, businesses were given 8 weeks after loan funding to use in their calculation of loan forgiveness. That timeline is now moved to 24 weeks. Due to the extended stay-at-home orders and further assessment of the pandemic.


Non-payroll expenses. The original law requires 75% of loan proceeds to be spent on payroll. For businesses with high cost of goods sold or who have trouble convincing furloughed workers to return to work, hitting this 75% threshold is problematic. The new law reduces the amount of loan proceeds required to be spent on payroll to 60%.


More flexibility in fully restoring workforce. Borrowers now have through December 31, 2020 to restore their workforce levels and wages to the pre-pandemic levels required for full loan forgiveness. There are three exceptions allowed for not having a fully-restored workforce by December 31. Borrowers can adjust their loan forgiveness calculations due to :

  • Employees who turn down good faith offers to be rehired at the same hours and wages as before the pandemic

  • Difficulty finding qualified employees

  • COVID-19 related operating restrictions


Loan terms extended. For loans that do not qualify for forgiveness, borrowers now have up to five years to repay the loan instead of two years. The interest rate remains at 1%. Since your bank has 60 days to process your loan forgiveness application and the SBA has 90 to process the request, your initial payment is now effectively five to six months after your forgiveness application.


Next steps. Remain in contact with your lending institution about the loan forgiveness application. You may wish to delay your loan forgiveness application to take advantage of these new rules. And reach out to your legislators and let your voice be heard on how you were impacted and share your story on your PPP loan experience. Several U.S. Senators indicated that there will be more changes in the future regarding the program.

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