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PPP Loan Forgiveness: Passing of Payroll Protection Flexibility Act

The House and Senate have passed changes to the PPP loan forgiveness requirements, and have changed the repayment requirements for amounts not forgiven. The President is expected to sign these changes into law.


Here is a brief summary:


  • The 8 week or 56 day time period to use the proceeds has been extended to December 31, 2020 or 24 weeks from the funding date, whichever comes first.

  • The requirement that 75% of the proceeds be spent on payroll and related expenses has been reduced to 60% of the proceeds. There is potential uncertainty regarding the impact of not meeting the 60% threshold. The original CARES Act allowed for partial forgiveness if the 75% threshold was not met, but the current House bill, which was approved by the Senate, seems to indicate that if the 60% threshold is not met no portion of the loan may be forgiven. This may not be the intent, and there may be additional legislation or other clarifications.

  • The employer must restore its work force by December 31, 2020 or 24 weeks from the funding date rather than June 30, 2030 or 8 weeks. There will now be some exceptions if employees refuse to return to work or an employer is unable to find qualified employees.

  • The employer may also delay payment of the employer portion of payroll taxes under the Deferred Tax portion of the CARES Act.

  • The repayment period for the unforgiven amounts has been extended from two years to five years.


There are still approximately $130 billion of funds available to businesses under the PPP loan program, and the deadline to apply for funds remains June 30, 2020.


The maximum number of employees has been broadly reported as 500 employees, however there are exceptions for certain NAICS codes as published by the SBA. This link will take you to the SBA publication related to size.


Companies may still begin asking for forgiveness 8 weeks after the funding date and once the forgiveness request is made of the lender, the lender has 60 days to respond.


What does this mean?


Companies need to reevaluate their ability to manage PPP loan proceeds to the forgiveness standards. Companies may adjust their tracking to test to 60% rather than 75%, and 24 weeks rather than 8 weeks.


Companies that have not previously applied for the PPP loan due to size issues should reevaluate their position based on the link to the SBA size standards coupled with the new use of proceeds standards.


Companies that have not previously applied for the PPP loan due to use of proceeds concerns should consider applying.


Companies that had not been considering deferring employer payroll taxes should reconsider that decision.


Is this final?


There will be further clarifications through legislation or rules issued by the Department of Treasury and the SBA related to the Payroll Protection Flexibility Act. Continue to monitor for those changes, especially as related to partial forgiveness and changing employee numbers.


Contact us if we can be of any assistance in evaluating options or applying for loan forgiveness.

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