9 Things PPP Loan Borrowers Should Know About the PPP Flexibility Act

June 6, 2020

By: Eric N. Fischer, Rod Kubat

The Paycheck Protection Program Flexibility Act (“Flexibility Act”) was enacted on June 5. This legislation attempts to provide additional flexibility to current and future borrowers under the Paycheck Protection Program. There are some ambiguities in the new legislation that will require clarification through regulation or other guidance.


The major changes made by the Flexibility Act to the PPP Loan program are outlined below. The Flexibility Act:


  1. Extends the minimum maturity for PPP loans to five years. This requirement applies only to loans made after the enactment of the Flexibility Act.

  2. Extends the period for using loan proceeds until December 31, 2020.

  3. For purposes of loan forgiveness, the Act redefines the Covered Period to begin on the date of loan origination and end on the earlier of (a) the date that is 24 weeks after loan origination or (b) December 31, 2020. Absent future contrary guidance, a borrower who received a loan before the bill’s enactment could elect to continue using the eight-week Covered Period.

  4. For purposes of avoiding a reduction in the amount of loan forgiveness, extends the date for rehire restoration exemption from June 30, 2020 to December 31, 2020.

  5. For purposes of the FTE reduction test, indicates that reductions in full time employee equivalents are disregarded where the employer is able to document in good faith (a) an inability to hire individuals who were employees of the borrower on February 15, 2020, (b) an inability to hire similarly-qualified employees for unfilled positions on or before December 31, 2020, and (c) 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 HHS, CDC, or OSHA during the period beginning on March 1, 2020 and ending on 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.

  6. Reduces the requirement on the amount of forgivable expenditures spent on payroll costs from 75% to 60%.

  7. Revises the loan deferment period from six months from the loan origination to the date on which the loan forgiveness decision is remitted to the lender.

  8. Adds a requirement that a borrower that fails to apply for loan forgiveness within 10 months after the last day of the Covered Period shall make payments of principal, interest, and fees beginning no earlier than the date that is 10 months after the last day of such Covered Period.

  9. Allows an employer that receives a PPP loan to defer the deposit and payment of its share of social security tax that is due after the loan forgiveness determination is made until December 31, 2020. Those taxes are deferred 50% to December 31, 2021 and 50% to December 31, 2022.


In the event you have follow up questions on these Payroll Protection Program Flexibility Act or have other questions about the Paycheck Protection Program or other COVID-19 related relief, please contact your Nyemaster Goode attorney



Visit Nyemaster Goode's Paycheck Protection Program Resource Center