Paycheck Protection Program Flexibility Act of 2020

Earlier today, President Trump signed the Paycheck Protection Program Flexibility Act of 2020 (“PPPFA”). The PPPFA addresses the problem many employers were facing with the ability to seek loan forgiveness based upon restrictions under the Paycheck Protection Program (“PPP”) enacted earlier this year.

The PPPFA relaxes the requirement that businesses spend at least 75% of the PPP loan proceeds on payroll. With many businesses closed due to the COVID-19 crisis, PPPFA reduces the payroll spending requirement to 60%, allowing businesses the ability to apply up to 40% of the PPP loan proceeds on other allowable expenses such as mortgage loan interest, or rent. In addition to revising the spending parameters, the PPPFA extends the 8-week period for use of PPP loan proceeds for payroll expenses to 24 weeks. Although the $100,000 salary cap per employee remains, the ability to spread the loan proceeds over more hires may be welcomed relief.

Relief also is provided through the PPPFA by extending the 24-month repayment period to 60 months. The interest rate applied to PPP loans remains at 1% per annum.

Additional breathing room is provided to employers through the PPPFA by expanding the deadline for rehiring of workers. The PPP loan forgiveness parameters require reporting the same employment levels (with some narrowly defined exceptions) as of February 15, 2020 and at the time of loan forgiveness. The PPPFA expands the current June 30, 2020 rehire deadline to December 31, 2020. The expanded rehire date complements, but does not mirror, the expanded 24-week payroll spending period for calculating loan forgiveness.

For businesses that do not rehire individuals, the PPPFA allows additional flexibility when applying for loan forgiveness, taking into consideration:

  • inability to rehire an individual who was an employee on or before February 15, 2020
  • inability to hire similarly qualified employees on or before December 31, 2020
  • inability to return to the same level of business activity as such business was operated prior to February 15, 2020.

Guidance and clarification will be issued in the coming days and weeks from the Small Business Administration (“SBA”) to explain how to demonstrate the inability to rehire similarly qualified employees or what the standard will be for that demonstration.


We are committed to assisting our clients through the loan process, and we will provide updates as more information becomes available. Please contact Len Gambino (312-648-2300) or Joan Berg (312-775-3624) with any questions you may have.

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