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PrimeGlobal member firm Smith Schafer & Associates looks at the Payment Protection Program Flexibility Act.

Yesterday, June 3, the Senate passed the Paycheck Protection Program (PPP) Flexibility Act. 

This Act makes several significant revisions to the PPP, initially created in the CARES Act. See critical provisions below.


  • Extension of the time to use funds for eligible expenses from eight weeks to the earlier of 24 weeks or December 31, 2020.

  • Reduction in the percentage of qualified expenditures that must be used on “payroll costs” from 75% to 60%. However, the 60% requirement is a cliff requirement; if the borrower does not spend at least 60% of the loan proceeds on “payroll costs,” the loan forgiveness will be zero.
  • Delay in the measurement date for the safe harbor on employee headcount from June 30 in the Cares Act to December 31.
  • Increase repayment term for any remaining loan after forgiveness from two years to five years. However, this will only apply to loans issued on or after the date of the PPP Flexibility Act, unless mutually agreed to by the borrower and lender.
  • Provides an exemption from the loan forgiveness reduction related to employee headcount based on employee availability to fill open positions.
  • Provides an exemption from the loan forgiveness reduction related to employee headcount based on the inability to return to the same level of business activity as the business was operating before February 15, 2020, due to compliance with requirements established or guidance issued by various government agencies related to COVID-19.
  • Changes the loan payment deferment period from six months to the date on which the Small Business Administration remits payment to the lender for the loan amount forgiven.
  • Implements a filing deadline for the loan forgiveness application of 10 months from the end of the covered period.
  • Provides that PPP borrowers are eligible to defer deposits of the employer Social Security tax (6.2% tax) on employee payroll through December 31, 2020. Under the Cares Act, PPP loan forgiveness recipients were ineligible. The deferred deposits are due 50% by December 31, 2021, and the remaining 50% by December 31, 2022.

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Smith Schafer & Associates, Ltd.

Update overall summary - Smith Schafer is a community-oriented public accounting and business consulting firm offering a thoughtful advisory relationship to business and individual clients since 1971. Our deep bench of local, experienced professionals in Rochester, the Twin Cities and Red Wing, Minnesota, result in high-value results and loyal relationships. Our client satisfaction is exceptional, as demonstrated by our 95% satisfaction rate.

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