The Paycheck Protection Program Flexibility Act (PPPFA) of 2020 relaxes some rules of the Paycheck Protection Program (PPP) that were having unintended negative effects on small businesses.

Employers found themselves paying non-essential workers to stay home while the economy was shut down due to COVID-19, basically serving as an in-house unemployment office in hopes of qualifying for loan forgiveness after 8 weeks.


PPPFA extends time to use borrowed money to 24 weeks

Borrowers now have more time to use funds from a Small Business Administration (SBA) loan to qualify for forgiveness.  The PPPFA allows up to 24 weeks of payroll expenditures or until December 31, 2020, whichever comes first, for borrowers to meet the requirements to have their debt cancelled. For companies temporarily closed by government mandate, this allows owners the freedom to conserve money now while operations are halted and then spend the funds after re-opening.  Borrowers may still opt to apply for loan forgiveness at the 8-week mark if they wish.


PPPFA reduces amount to qualify for forgiveness

Under the PPPFA, business now must only demonstrate a minimum of 60% of borrowed funds were spent on salaries, rent, mortgage, utilities and interest payments on other debt. The original amount was 75% under the PPP. Business groups are still lobbying to extend the list of approved expenditures to include added expenses of remote working, personal protection equipment (PPE) and other costs of doing business.


PPPFA loan repayment

Senators expressed concern over one “unintended circumstance” of new provisions under the PPPFA.  While the chances for loan forgiveness are improved, failure to meet the requisite spending on approved expenses will mean 100% of the principal amount must be repaid.  Under the original PPP, if a business did not receive loan forgiveness, repayment was pro-rated only to the amount that failed to satisfy requirements. In order to mitigate the hardship on borrowers who must repay their loans, terms under the PPPFA are 1% interest over 60 months (up from 24 months under the PPP).


PPPFA payroll tax deferments

Employers who borrow money under a PPP loan may now take advantage of a CARES Act provision that permits deferment of payroll tax payments through December 31, 2020, regardless of when or if loan forgiveness is granted.


PPPFA eases rehiring stipulations

Borrowers are required to keep the same number of employees on payroll as they had when they applied for a PPP loan.  If employees were furloughed or laid off, businesses are required to rehire employees when possible or replace them with the same number of full-time employees or full-time equivalents (FTE).

PPPFA extends the time employers have to return to full staffing from June 30, 2020 to December 31, 2020.

The new PPPFA law also states a business can still receive forgiveness on payroll amounts if it:

  • Is unable to rehire an individual who was employed on or before February 15, 2020 by documenting in writing an attempt to rehire the employee was rejected.
  • Is able to demonstrate an inability to hire similarly qualified employees on or before December 31, 2020
  • Is able to demonstrate an inability to return to the same level of business activity they were operating at prior to February 15, 2020.


In short, the PPPFA gives business who borrowed funds under the PPP more time to meet a lower threshold to qualify for having that debt cancelled.  Business who do not qualify for loan forgiveness will have to repay the entire loan amount, but the term is extended from 2 years to 5 years.  The Treasury Department and SBA might convert unpaid PPP loans into Federal grants under certain conditions.  Learn more about that at

The PPPFA was passed by the House of Representatives on May 27th and unanimously approved by the Senate on June 3rd. President Donald Trump signed the bill into law on June 5, 2020.