PPP Flexibility Act loosens guidelines for businesses to ensure more loans will be forgiven

The new act offers updates to the original PPP loans in an attempt to solve problems that emerged from the program.

One of the biggest changes to the program was the lowering of the percentage of funds that borrowers need to use for payroll costs in order to ensure loan forgiveness.

Under the new act, a borrower can remain eligible for loan forgiveness by using at least 60% of the funding for payroll costs. Originally, businesses needed to use 75% of the funding for payroll.

The new legislation also extended the time a business can use the funding. A borrower now has 24 weeks to distribute the the funding rather than eight weeks.

Borrowers who have already received PPP loans retain the option to use an eight-week covered period.

The flexibility act also gives businesses more wiggle room regarding employment when requesting loan forgiveness.

The new guidelines ensure that borrowers who are unable to return to the same level of business prior to Feb. 15 won’t be penalized for reducing the number of full-time equivalent employees.

The new act also provides protections for borrowers who are unable to rehire individuals who were employees on Feb. 15 and unable to hire employees for unfilled positions by Dec. 31, 2020.

In the original program, both layoffs and rehiring were pillars associated with loan forgiveness.

Borrowers also have the ability to extend the deferral period for payments of principal, interest, and fees until the date that SBA forgives the loan.

If a borrower does not apply for loan forgiveness, the deferment will be pushed to 10 months after the end of the borrower’s loan forgiveness covered period – whether it’s eight or 24 weeks.

PPP loans were provided to businesses around the country through two installments with more than $600 billion in funding.

Despite the new rules, the deadline to apply for the loans remains June 30.