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Latest Rule Change for PPP Forgiveness

By Julie A. Vaccarelli, Esq.

In the ever-changing world of Paycheck Protection Program ("PPP") and the parameters for forgiveness, the President signed the Paycheck Protection Program Flexibility Act ("PPPFA") June 6, 2020. The key takeaways are as follows:

  1. The ratio of payroll to expenses changed.

In the original rule, borrowers were required to spend 75% of the PPP funds on payroll and related expenses. The new law changes that percentage to 60%. This allows 40% of the funds to be used for business expenses (rent, utilities, interest on existing debt) rather than the original 25%. The 60% limitation now acts as a prerequisite to loan forgiveness. If a borrower does not spend at least 60% of the PPP loan funds on approved payroll costs, no amount of the PPP loan is available for forgiveness.

  1. Time period to use funds extended.

Solving the issue for many businesses shut down by government order during the usage period, the PPPFA extends the PPP funds usage period to 24 weeks instead of the original 8-week limitation.

  1. Extended deadline to rehire workers.

Prior to PPPFA, the PPP required borrowers to rehire workers by June 30, 2020 in order for their salaries to count for forgiveness purposes. The PPPFA extends that deadline to December 31, 2020.

  1. Repayment extended for loans funded after June 6, 2020.

The repayment period for any PPP amount not forgiven is now extended from two tofive years. Unlike the three changes listed above, which apply retroactively for all PPP loans, the five year extended repayment period only applies to loans funded after June 6, 2020.

PPPFA changes the spending analysis significantly. If you were considering spending down your funds by issuing bonuses or other additional compensation, now may be the time to re-evaluate your plan.

We are here to assist. Please reach out to one of our attorneys with questions.


This article provides an overview and summary of the matters described therein. It is not intended to be and should not be construed as legal advice on the particular subject.

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