Congress Passes Paycheck Protection Flexibility Act (PPFA)

On June 3, the Senate voted to approve the Paycheck Protection Flexibility Act (PPFA), the House bill which triples the time allotted for small businesses and other Paycheck Protection Program (PPP) loan recipients to spend the funds and still qualify for forgiveness of the loans. The bill has been forwarded to the White House, where President Trump is expected to sign it into law. Following is a brief review of the major elements of the PPFA:

  • PPP borrowers can choose to extend the 8-week period to 24 weeks, or they can keep the original 8-week period. This flexibility is designed to make it easier for more borrowers to reach full, or almost full, forgiveness.
  • Under the language in the House bill, the payroll expenditure requirement drops to 60% from 75% but is now a cliff, meaning that borrowers must spend at least 60% on payroll or none of the loan will be forgiven. Currently, a borrower is required to reduce the amount eligible for forgiveness if less than 75% of eligible funds are used for payroll costs, but forgiveness isn’t eliminated if the 75% threshold isn’t met.
  • Borrowers can use the 24-week period to restore workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by December 31, a change from the previous deadline of June 30.
  • The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to February 15, 2020, levels due to COVID-19 related operating restrictions.
  • Borrowers now have five years to repay the loan instead of two. The interest rate remains at 1%.
  • The bill allows businesses that took a PPP loan to also delay payment of their payroll taxes, which was prohibited under the CARES Act.