The Paycheck Protection Program (PPP) is a loan designed to incentivize small businesses to keep their employees on payroll. It was established as part of the Coronavirus Aid, Relief, and Economic Security Act in March 2020. Since then, it has been the subject of additional stimulus bills, legal guidance, and interim final rules. In the latest development, Congress passed the Paycheck Protection Program Flexibility Act of 2020, which is a bill that provides borrowers with greater flexibility in regard to spending their PPP funds without compromising forgiveness eligibility. President Donald Trump signed the bill into law on Friday, June 5, 2020.


The bill, which passed with bipartisan support, makes the following amendments to the Paycheck Protection Program:

  • Loan repayment termsFor unforgiven PPP loans that need to be repaid, the bill extends the minimum loan term from two years to five years.
  • Payroll costs vs. non-payroll costs : The bill reduces the portion of PPP funds that must be spent on payroll costs from 75% to 60%. Subsequently, the non-payroll cost limitation was raised from 25% to 40%.
  • Covered period extension : The covered period during which borrowers must spend PPP funds to be eligible for forgiveness was originally 8 weeks. The P.P.P. Flexibility Act of 2020 has extended that period to 24 weeks from the date of the origination of the loan.
  • Payroll tax deferment : The bill permits borrowers to defer payroll taxes without being penalized while still remaining eligible for loan forgiveness.
  • Extension of rehiring safe harbor : The rehiring safe harbor has been extended by 6 months. This provides borrowers additional time to restore payroll or rehire employees without a reduction in the eligible amount of forgiveness. Originally, the rehiring safe harbor was valid until June 30, 2020 but has been extended to December 31, 2020.
  • Forgiveness Application Deadline : The deadline to submit a forgiveness application is 10 months after the end of the 8 to 24 week loan period. If borrows do not submit the application must begin paying on the principle and interest of that loan.


In addition, the bill provides loan forgiveness eligibility exemptions for borrowers unable to rehire an employee or a replacement. Exemptions are also available if borrowers cannot return to the same level of business due to Covid-19 orders/circumstances.


If you are a Paycheck Protection Program borrower, we recommend reviewing the bill carefully. Speak to your lender if you have any questions.

We will keep our eyes peeled and ears to the ground for any additional developments regarding the PPP. You can be sure we will deliver updates as necessary. For more information about updates to the Paycheck Protection Program Flexibility Act, please reach out to us here at Camargo Insurance.