What is the PPP Flexibility Act?


The Paycheck Protection Program Flexibility Act of 2020 makes a number of adjustments to the PPP aimed at assisting small businesses.

PPP Application Deadline

It is unclear if, but unlikely that the PPPFA will extend the time frame during which the SBA will accept PPP applications. Some members of Congress (including both ranking members on the Senate Committee on Small Business & Entrepreneurship) have issued a Letter of Congressional Intent stating that the PPPFA should not be interpreted as extending the application deadline.. The SBA and Treasury department are likely to issue further clarification confirming one way or the other. If you are still on the fence about whether to apply or not, it is likely that the deadline for applications will remain June 30th.

Extension of the Covered Period

Under the previous implementation of the PPP, loan forgiveness was limited to funds spent on eligible expenses during the eight-week period following the receipt of funds, referred to as the covered period. This has been extended to be the 24 week period following receipt of the funds, or until December 31st, 2020, whichever comes first.

Reducing the 75% Payroll Cost Floor

To be eligible for forgiveness, borrowers must now use 60% of their total PPP funds for Payroll Costs. This also clarifies a prior ambiguity, in that borrowers must spend at least 60% of the total loan amount on payroll costs to be eligible for forgiveness.

Expanding the Exemptions

The deadline for borrowers to return to pre-COVID employment levels has been extended from June 30th to December 31st. Employers will have two additional avenues available for exemptions if they experience a reduction in Full Time Equivalent employee count. The FTE exemption will be applied if the borrower can, in good faith, document:


“(i) an inability to rehire individuals who were employees of the eligible recipient on February 15, 2020; and

“(ii) an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020; or


“(B) is able to document an inability to return to the same level of business activity as such business was operating at before February 15, 2020, due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration during the period beginning on March 1, 2020, and ending December 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19.

Adjustments to Loan Maturity and the Deferral Period

The maturity period for new PPP loans will be, at minimum 5 years. For existing PPP loans, the PPPFA explicitly allows borrowers and lenders to mutually agree to modify existing terms to conform with the new minimum of 5 years.

The deferral period for interest on PPP loans has been extended to one year.

Employers who had PPP loans forgiven may now also seek deferral on 2020 payroll taxes, per the CARES act.