Home Church Management The Paycheck Protection Program Flexibility Act Of 2020, Explained

The Paycheck Protection Program Flexibility Act Of 2020, Explained

by Clay Harmon

On June 5, Congress passed an amendment called the Paycheck Protection Program Flexibility Act of 2020 (PPPFA), which made several changes to the Paycheck Protection Program (PPP). These changes were meant to loosen restrictions on the PPP so terms are more favorable for borrowers. If you are unfamiliar with the PPP⁠—the SBA program that offers businesses forgivable loans to help cover payroll and operational costs—then check out this overview that breaks down the program. Also, if you have not yet applied for the PPP loan and wish to, the loan program ends on June 30. You can find tips in this resource on how to apply for the Paycheck Protection Program

Below, we’ve provided changes to the PPP that were a result of the recent amendment, but please follow up with your bank to ensure that your organization is meeting all requirements surrounding PPP loan forgiveness.

  1. Covered period for loan forgiveness extended to 24 weeks
    Organizations can extend their PPP loan period from 8 weeks to 24 weeks, which will give them more time to use the loan on expenses that qualify for loan forgiveness. Organizations that have an 8-week loan period may keep this option if desired.
  2. Payroll expense requirement lowered to 60%
    In order to qualify for full loan forgiveness, the required amount spent on payroll costs has been lowered from 75% to 60% of the loan and loan forgiveness amount. If a borrower uses less than 60% of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness.
  3. Additional safe harbor for employers that are unable to meet the FTE requirements
    For borrowers that were unable to return to the same level of business activity the business was operating at before February 15, 2020, and as a result still haven’t been able to bring back all their full-time equivalent employees, there are new measures that protect them from having reductions in their loan forgiveness. This applies to businesses that couldn’t bring back full-time equivalent employees due to compliance with requirements or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to worker or customer safety requirements due to COVID–19.
  4. Additional safe harbor for employers that are unable to meet the FTE requirements
    Another protection against loan forgiveness reductions applies to businesses that were both unable to rehire individuals who were employees of the borrower on February 15, 2020, and unable to hire similarly qualified employees for unfilled positions by December 31, 2020. The requirements for this are listed in the Federal Register as follows:
    a. The borrower made a good faith, written offer to rehire such employee (or if applicable, restore the reduced hours of such employee) during the covered period or the alternative payroll covered period.
    b. The offer was the same salary or wages and same number of hours as earned by such employee in the last pay period prior to the separation or reduction in hours;
    c. The offer was rejected by such employee;
    d. The borrower has maintained records documenting the offer and its rejection; and
    e. The borrower informed the applicable state unemployment insurance office of such employee’s rejection of the offer.
  5. Loan maturity increased to 5 years
    The maturity of PPP loans approved by the SBA was increased to 5 years, based on the date the SBA assigns a loan number on or after June 5, 2020.
  6. Extension of loan deferral period
    There was an extension on the deferral period for borrower payments of principal, interest, and fees on PPP loans to the date that the SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period).
  7. The loan application date remains June 30, 2020
    In addition, the new rules will confirm that June 30, 2020, remains the last date on which a PPP loan application can be approved.

Other Important Items

  • Per the Federal Register, “if applicable, SBA will deduct EIDL Advance Amounts from the forgiveness amount remitted to the Lender as required by section 1110 (e )(6) of the CARES Act.”
  • If a borrower’s loan does not exceed $2 million, the borrower will not be asked to prove if they meet all the “good faith” requirements set out by the CARES Act.


Please note the loan forgiveness application was created prior to the PPP Flexibility Act and may be revised. Aplos will review the new guidance on how to apply for loan forgiveness when the SBA publishes any changes.

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