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Changes to PPP Loan Forgiveness: The PPP Flexibility Act of 2020

Key Points about the Paycheck Protection Program Flexibility Act of 2020:


The Paycheck Protection Program (PPP) Flexibility Act of 2020 was just signed into law on June 5, 2020. It makes key changes to the PPP loan program first introduced under the Coronavirus Aid, Relief and Economic Security (CARES) Act. Most notably, it extends the covered period for loan forgiveness and reduces the amount of the loan that must be used for payroll-related costs.

The key changes made under the PPP Flexibility Act of 2020 are outlined below:

The covered period for PPP loan forgiveness has been extended to 24 weeks (rather than 8 weeks) from the loan’s origination date (or December 31, 2020, whichever comes first). You may still choose to use the original 8 week period if you would like.

The percentage of funds required to use toward payroll costs has been reduced to 60% (rather than 75%). This means that allowable non-payroll uses (interest on mortgage, rent, or utilities) has been increased to 40%.

The deadline to rehire employees to avoid a reduction in your PPP loan forgiveness has been extended to December 31, 2020. However, this will not apply to your business if you are able to document an inability to rehire employees who had been employed on February 15, 2020 and one of the following:

  • An inability to hire similarly-qualified employees for those unfilled positions on or before December 31
  • An inability to return to the same level of business activity you had as of February 15, 2020 due to compliance with the government’s requirements and guidelines set forth between March 1 and December 31, 2020 related to sanitation standards, social distance, and other safety requirements due to COVID-19.

The key terms of a PPP loan are now 1% APR over a 5 year term (rather than 1% APR over a 2 year term).

The employer portion Social Security tax can still be deferred, even if your PPP loan is not forgiven.

Loan payments for unforgiven funds are deferred until your lender determines the amount of forgiveness. You now have 10 months to apply for forgiveness, or must start making payments. The 10-month period starts the last day of the covered period for PPP loan forgiveness (24 weeks after the loan’s origination date or December 31, 2020, whichever comes first).


The PPP Flexibility Act of 2020 is only one of several new laws passed in response to the COVID-19 pandemic. Our Interactive Guide to COVID-19 Legislation includes more information about the PPP loan and other key legislation. Click here to download it.