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Inside the New Rules for Loan Forgiveness: PPPFA

by Jane Cowles

Just as the date to apply for loan forgiveness under the Payroll Protection Program loomed, both Congress and the Senate approved a bill to modify the program to the benefit of many businesses. The new program called the Payroll Protection Program Flexibility Act (PPPFA) eased some of the rules to address the concerns of business owners. There are 5 key provisions to the PPPFA released on June 3rd.

Reduced Payroll Expense Requirement

Under the PPPFA, a business is still eligible for loan forgiveness even when it does not spend three quarters of the loan proceeds on payroll expenses. Now, businesses need to spend a little more than half, 60 percent, of the loan on payroll. It reduces the burden on businesses, which under the original PPP, took the place of an unemployment agency (as Forbes aptly points out).

More Time to Require Employees

Under the PPPFA, businesses have an additional 6 months to bring back their workforce. The PPP set the rehire deadline for June 30th. The PPPFA extended this time until December 31st.

Additionally, businesses that document rejections of a good faith offer to rehire an employee and/or inability to rehire due to downturn in business may still qualify for loan forgiveness. See additional information in the Journal of Accountancy.

Additional Time to Repay

If a loan is not forgiven in full, businesses will now have additional time to repay. The PPPFA increases the terms to 5 years instead of 2 years. For more information, read this summary by Forbes.

More Time to Spend

Initially, businesses had eight weeks after the date of disbursement to spend the loan proceeds. This provision was not feasible at a time when most businesses were closed or significantly reduced due to the COVID19 restrictions. Now, under the PPPFA, businesses have twenty-four weeks from the date of disbursement to use the funds provided to them under the program.

Include Unforgiven EIDL Amounts

Businesses can include unforgiven EIDL amounts made between January 31st and April 3rd when applying for loan forgiveness under the PPPFA. For additional details read this article in Smart Asset.

The government and various agencies like the SBA will be issuing guidance on the new rules. As of May 27th, the SBA issued a list of Frequently Asked Questions. As it stands, business will have questions about many of the new rules. Also note, that the Treasury guidelines still provide for audits.

This information is provided for general informational purposes only. No information contained in this article should be construed as legal advice and does not establish an attorney-client relationship.

Jane Cowles is an attorney focusing on contract law, business law (start-up, planning and restructuring), tax law and art law. She has over 10 years experience working with business transactions at boutique law firms and as a tax advisor for Ernst & Young. She has a solo practice in Rockland County and advises creative professionals, small businesses, and entrepreneurs. She is available to help with all the challenges individuals and business currently face with the COVID19 pandemic. For more information, visit her website or email her at She is offering 30 minute FREE consultations by telephone or video conference. 

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