Senate Passes PPP Flexibility Act: What This Means for PPP Loan Holders if President Trump Signs This into Law

June 5, 2020

The Senate passed a House bill, the Payroll Protection Flexibility Act, aimed to give those who received PPP funds both greater time and more options to utilize the loan proceeds. The bill is expected to be signed into law by President Trump, although, at the time of writing, this had not occurred (which of course means it will have passed by the time you read this. Love you, Karma.) Presuming it is signed, the changes may also allow some recipients greater forgiven amounts. (For a refresher on PPP Loans and Forgiveness you can check out my past blog posts.)

Highlights of the bill include:

  • A change in the “covered period,” from 8 weeks to 24 weeks.
  • An expanded timeframe to restore the workforce to pre-COVID levels.
  • A reduction in the percentage of PPP funds that must be used for payroll costs from 75% to 60% (although recipients may still use up to 75% for payroll).
  • A corresponding increase in the percentage of PPP funds that maybe used for approved non-payroll costs from 25% to 40%.
  • An option to request a change in the loan repayment deadline from 2 years to 5 years.
  • The possibility of a modification of the repayment deferment period while a forgiveness application is under review.

These changes hopefully will allow loan recipients to have both more time to think through their most optimal use of funds as things are just starting to reopen and also increase their likelihood of having some or all of the loan forgiven. Of course, with these changes, there may be more questions. For example, does that then mean that payroll levels need to be maintained for 24 weeks instead of 8 weeks? You guys know what I’m going to say, right? It depends. 😉. In general if a loan recipient extends its covered period for usage, then the covered period changes for all purposes of that definition, but as always, individual situations may vary and should be reviewed with your favorite legal and/or tax professional.

With these changes, it likely means the Forgiveness Application will need to be changed. Check back here for updates on that.  Do you need help sorting out what this all means? Or would you like some with you through the forgiveness application process? Our PPP Loan support services may be right for you. Please contact us to find out more.

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1. The information above does not constitute legal advice, nor does it create an attorney-client relationship. Please consult your attorney with specific questions.
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