Important Changes to the Paycheck Protection Program

On Friday June 5, 2020, the administration enacted the Paycheck Protection Program Flexibility Act (“PPPFA”) of 2020 which makes important changes to the original Paycheck Protection Program (PPP). The PPPFA is designed to address some of the perceived shortcomings of the original PPP and provide businesses greater flexibility in how and when they can use borrowed funds and still secure loan forgiveness.

The first provision of the PPPFA applies only to loans made after its enactment. With respect to those loans, amounts that remain owing after application for forgiveness (and thus convert to unpaid loans) will have a minimum maturity date of 5 years, and a maximum maturity date of 10 years from the date of the application for loan forgiveness. (Prior language did not specify the minimum maturity date.) Although this provision technically only applies to loans made after today, it does not prohibit lenders and borrowers from modifying prior loan agreements consistent with the new language.
Additional key elements of the PPPFA are effective as of the date of the original CARES Act:

  • The “covered period,” i.e. the time period during which a business must spend PPP funds, is extended beyond the 8 weeks in the original law to the earlier of: (i) 24 weeks from the date on which the loan is originated; or (2) December 31, 2020. (Recipients of prior PPP loans may also elect to retain the original 8-week covered period.)
  • Loan forgiveness will not be affected by a reduction in FTEs if a business can document:
    • It is unable to rehire individuals who were employees on 2/15/20; and
    • It is unable to hire similarly qualified employees for unfilled positions before 12/31/20;
    • It is unable to return to the same level of business activity as it had on 2/15/20 due to compliance with requirements or guidance issued by the Secretary of Health and Human Services, the CDC or OSHA during the time period from 3/1/20 to 12/31/20, related to standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19.
  • A PPP loan recipient must use at least 60% of the covered loan amount for payroll costs, and may use up to 40% for mortgage interest, rent and utility payments. (Prior language required at least 75% of funds to be used for payroll and not more than 25% for mortgage interest, rent and utility payments.)
  • Lenders must provide complete payment deferment relief to PPP loan applicants until the date on which the amount of forgiveness determined is remitted to the lender. If a PPP loan recipient fails to apply for forgiveness within 10 months after the last day of the covered period, the recipient must make loan payments starting 10 months after the last day of the covered period.

The legal and HR team at Lake Effect is closely monitoring new legislation and guidance and will continue to provide our clients with updates as they are available. Please visit our COVID-19 resource page for all of our pandemic-related legal updates and HR best practices. The attorneys and HR professionals at Lake Effect HR & Law are ready and willing to help. Contact us at or 1-844-333-5253.

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