Paycheck Protection Program Flexibility Act

If your business applied or is planning to apply for a Paycheck Protection Program (PPP) loan, we want to share some good news with you. On June 5, 2020, the Paycheck Protection Program Flexibility Act (PPPFA) was signed into law. The PPPFA modifies the PPP to allow businesses whose PPP loans are forgiven to continue to defer Social Security taxes through the end of 2020. Prior to the passage of the PPPFA, PPP loan recipients were required to stop deferring Social Security taxes as soon as any portion of their PPP loan was forgiven.

The PPPFA also includes other provisions that expand the time periods to spend PPP loans and provide increased flexibility to spend PPP funds on expenses other than payroll costs. Some of the other key provisions include:

  • Reduction of the percentage of loan proceeds that must be spent on payroll costs from 75% to 60%;

  • Extension of the “covered period” for use of funds from eight weeks to 24 weeks (or 12/31/2020, if earlier);

  • Extension of the period of time for employers to reverse decreases in employment and/or wage levels that occurred between February 15 and April 26, 2020, from June 30, 2020, to December 31, 2020;

  • Lengthening the period of loan maturity from two years to five years; and

  • Permission for borrowers to defer payment until loan forgiveness is determined, instead of six months after loan disbursement.

Employers that received PPP loans prior to June 5, 2020, may elect to retain the original eight-week covered period to spend loan proceeds. Those that use the longer covered period of up to 24 weeks may need to demonstrate compliance with the requirements to maintain employment levels through the entire 24-week period or to restore wage and full-time equivalent employee levels by December 31, 2020.

If your business has applied for a PPP Loan and you need assistance with the loan forgiveness application, please reach out to us to set up a virtual meeting to discuss how we can assist you. 

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