Last evening, Congress passed the Paycheck Protection Program Flexibility Act of 2020 (the “Flexibility Act”), which provides greater flexibility in how borrowers may use Paycheck Protection Program (“PPP”) loan funds and receive loan forgiveness. It is anticipated that the Act will be signed into law by the President in short order. Under the Act, businesses that have not already received a PPP loan will have until December 31, 2020 to apply, subject to continuing availability of funds. PPP monies are still available.

The Flexibility Act also extends the covered period used to determine loan forgiveness. Increased from 8 weeks, borrowers may now receive loan forgiveness for amounts spent on forgivable expenses during the 24 week period following loan origination, or December 31, 2020, whichever comes first. This is a welcome relief for many businesses.

The rehiring safe harbor time period also has been extended to December 31, 2020. This extension allows borrowers to rehire employees who were laid off or had salaries and wages reduced between February 15, 2020 and June 30, 2020 to still qualify for a reduction in loan forgiveness past the original 8 week period. Under the Flexibility Act, borrowers now have until December 31, 2020 to rehire employees or restore payroll levels without incurring any reduction in the forgiveness amount.

Additionally, in order to qualify for forgiveness, borrowers must now only use at least 60% of the PPP loan for payroll costs. This has been lowered from the initial 75% requirement. This means that up to 40% of the loan may be used for other eligible expenses, including mortgage interest, rent, and utilities and over a longer time period to qualify for loan forgiveness.

The Flexibility Act also prevents loan forgiveness from being reduced if a borrower is unable to rehire an employee or hire a replacement, or if a borrower is unable to return to its pre- pandemic levels of business due to certain governmental orders related to COVID-19.

Finally, the minimum maturity for PPP loans has been increased from 2 years to 5 years. This gives borrowers additional time to repay any unforgiven portions of their PPP loans.

PPP borrowers should be aware that their loans are subject to government audits. We recommend that all PPP borrowers prepare a substantiation memorandum to support and contemporaneously document the necessity for their loan and also to support their forgiveness application and other loan certifications. Our firm is helping many PPP borrowers to prepare such a memorandum that can be used with your tax accountant, banker, and potentially a government auditor, and we would be happy to assist your company with this process as well.

Note: This story does not constitute legal advice and we recommend that you consult with a lawyer regarding your specific facts and circumstances.


Julie Pace, Tim Forsman, and Chris Koester are attorneys with Gammage & Burnham. Contact them for more information on how your business can take full advantage of the Paycheck Protection Program in light of this new legislation, or for assistance with other Federal resources and requirements associated with the COVID-19 pandemic.