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President signs Paycheck Protection Program Flexibility Act into law

Legislation extends length of time businesses could use funds, eases regulation that limits only 25% of funds to non-payroll expenses
Jun 08, 2020

Washington, D.C. — President Trump on June 5 signed into law the bipartisan Paycheck Protection Flexibility Act, which makes vital changes to the Paycheck Protection Program so it can better support small businesses.

Key adjustments to the PPP include extending new loans over a longer period and allowing for added flexibility in how businesses can spend their PPP funds.

Chris Slevin, vice president at the Economic Innovation Group, expressed hope that the new legislation would encourage more small businesses to apply for help, "especially those very small shops previously deterred from accessing the short-term relief offered from this program."

Specifically, the Paycheck Protection Program Flexibility Act:

- Allows forgiveness for expenses beyond the eight-week covered period. The eight-week timeline does not work for local businesses that are prohibited from opening their doors, or those that will only be allowed to open with restrictions. Businesses need the flexibility to spread the loan proceeds over the full course of the crisis until demand returns. Otherwise, employees will simply be furloughed at the expiration of the eight weeks. This provision will allow the businesses that already have PPP loans to choose between using their loans in the initial eight weeks or extending the period for up to 24 weeks.

- Reduces restrictions limiting non-payroll expenses to 25% of loan proceeds. To survive, businesses must pay fixed costs. The SBA requires PPP loan recipients to use 75% of their loan to qualify for loan forgiveness. For many businesses, payroll simply does not represent 75% of their monthly expenses and 25% does not leave enough to cover mortgage, rent and utilities. Retaining employees is not possible if a business cannot retain its physical location.

- Eliminates restrictions in new loans that limit loan terms to two years. According to the American Hotel and Lodging Association, full recovery for that industry following both the Sept. 11, 2001, terrorist attacks and the 2008 recession took more than two full years. This is the same for many other industries. If the past is any indication of the future, it will take many businesses more than two years to achieve sufficient revenue to pay back a PPP loan if they do not achieve full forgiveness.

- Ensures full access to payroll tax deferment for businesses that take PPP loans. The purpose of both the PPP and the payroll tax deferment provision included in the CARES Act was to provide businesses with capital to weather the crisis. Receiving both should not be considered double-dipping. Businesses need access to both sources of cash flow to survive.

- Extends the rehiring deadline to offset the effect of enhanced Unemployment Insurance. To receive loan forgiveness under PPP, a business must rehire employees by a deadline of June 30, 2020. However, the enhanced Unemployment Insurance created through the CARES Act is higher than the median wage in 44 states. Many businesses have reported an inability to rehire employees because they are making more on Unemployment than they made working. To mitigate this unintended consequence, the act extends the deadline to rehire employees under PPP.

- Adjusts program standards to account for economic realities following the coronavirus pandemic. If economic conditions prevent businesses from reaching pre-coronavirus revenue levels and businesses aren’t able to rehire all employees, this legislation makes sure businesses are still able to receive loan forgiveness.



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Comments (3)
Posted by: George Terrien | Jun 10, 2020 08:48

Let us learn that "an unfortunate black man" is ALL of us, and act, talk, and think accordingly, please.

Posted by: Merton Sawyer | Jun 10, 2020 01:28

I have to agree with you Steve. I think it has a lot to do with trying to make us become more dependant on the government. We need smaller government with less power over us. I dont want to think it's the beginning of the end but we all can see where this is going. It is very upsetting.

Posted by: Stephen K Carroll | Jun 09, 2020 07:59

Curious as to why with more than half of all U.S. businesses closed, many soon to be closed forever, almost 40 million people out of work, lawlessness and looting in our street and by the way a global pandemic....why the stock market, major banks and large corporations are doing well ?  That's because once again Americans have been dupped by their elected leaders.  While they dole out billions to their millionaire friends you Mr. & Mrs America are given a loan, yes a loan, which should your business survive, you will be required to pay back plus interest.  Why are millions marching in the street ?  Wake up Sam is not your Uncle and it's not just about an unfortunate Black man, it's about our lives too.  While Nancy Pelosi enjoys her $12 a pint ice cream, thousands go hungry.  Figure it out America.  You're on the short end of this stick.

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