Both the United States Senate and House of Representatives have passed the Paycheck Protection Program Flexibility Act of 2020 (Act). This bill modifies the provisions related to forgiveness of loans made to small businesses under the Paycheck Protection Program (PPP). The president signed the bill into law this afternoon. These modifications strongly favor businesses who have obtained PPP loans, and make the road to loan forgiveness clearer.
Some changes include:
- Extending the “covered period” under which small businesses can spend the proceeds of their existing PPP loans from eight (8) weeks to 24 weeks, or until December 31, 2020, under certain circumstances.
- Removing reductions of loan forgiveness amounts for small businesses that were, for specified reasons, unable to rehire employees, to hire new employees, or to return to the same level of business activity as before the virus.
- Expanding the 25% cap for use of PPP funds on non-payroll expenses, such as rent, mortgage interest, and utilities, to 40% of the total loan. This lowers the 75% requirement for payroll expenses to 60% to get maximum forgiveness.
- Allowing small businesses to take a PPP loan and also qualify for a separate, recently enacted tax credit to defer payroll taxes, currently prohibited to prevent “double-dipping.”
- Extending the loan terms for any unforgiven portions that need to be repaid, from two years to five years at 1% interest.
- Giving small businesses more time to rehire employees or to obtain forgiveness for the loan if social-distancing guidelines and health-related actions from the Centers for Disease Control and Prevention or other agencies prevented the business from operating at the same capacity as it had before March 1, 2020.
- Extending the PPP repayment deferral period from the current six months to the date on which the amount of loan forgiveness is remitted to the lender. If a borrower does not apply for forgiveness within ten months, they must begin to make payments.
If you have any questions feel free to contact Kaufman & Canoles. We are continuing to monitor the relevant administrative agencies on a continuing basis and will advise clients if additional information is forthcoming on this issue.
The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances. Copyright 2026.
