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Paycheck Protection Program Flexibility Act: What does it mean?

Kim Ellingson

On Friday, June 5, the Paycheck Protection Program (PPP) Flexibility Act was signed into law. This legislation will direct a variety of changes to PPP loan forgiveness.

What’s changing with PPP Flexibility

While banks await additional guidance from the SBA on how this affects their processing of PPP loan forgiveness applications, here are some key points from the PPP Flexibility Act.

  • Extended forgiveness period. Originally, the PPP allowed for loan forgiveness on a variety of expenses within eight weeks of receiving loan funding. The PPP Flexibility Act now allows for loan forgiveness on up to 24 weeks of expenses.
  • Lowered payroll requirement. When it launched, the PPP forgiveness details required that 75% of loan proceeds be directed to payroll. The new PPP Flexibility Act reduces that threshold to 60%. There are some other nuances related to this, so we are awaiting possible calculation revision and other guidance.
  • Safe harbor for FTE reduction. The new act allows for some exclusions from loan forgiveness reduction for borrowers who are unable to rehire to certain levels.
  • Increased maturity period. PPP loans originated on or after June 5, 2020 will be issued with a five-year maturity. For loans issued prior to that date, the law allows for lenders and borrowers to mutually agree to extend a loan term.

What’s not changing (for now)

The June 30 deadline for new PPP loan fundings remained unchanged in this legislation. If you have not yet obtained a PPP loan, but wish to apply for one, reach out to a business banker to complete that process ahead of the program’s June 30 expiration.

Additional forgiveness guidance from the SBA is expected soon, so we can’t rule out the possibility that the SBA will issue a new PPP loan forgiveness application form.

In late May, a group of over 50 members of Congress sent a letter to the Treasury and the SBA to urge for a simplified calculation and forgiveness application form. At the same time, many state-level banking associations submitted a letter with the same request for a “PPP-EZ” form or process. It’s unclear whether any action or changes will take place as a result of this request.

Resources to turn to

While Bremer Bank and other financial institutions are gearing up their PPP loan forgiveness application processes, you can continue to collect relevant documents and read up on the program. Here’s a list of resources for more information on PPP Flexibility and the forgiveness provisions.

You may also want to consult with other advisors such as a CPA and partners who know your specific circumstances to support you in finalizing your application.

Your Bremer banker will continue to partner with you and share details of the loan forgiveness process as they are available. 

Kim Ellingson

About Kim Ellingson

Kim is a Region President with Bremer, with an over 20-year history of providing business banking solutions.   Kim holds a degree in Business Administration, Management and Operations from Concordia College. She is an active volunteer in the Brainerd Lakes area and northern Minnesota, serving on Board of Trustees for Initiative Foundation. She is also past-Chair of the Brainerd Lakes Chamber of Commerce, a past Board of Directors member for St. Joseph's Foundation, and an active volunteer with her church. )

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