Skip to headerSkip to main contentSkip to footer
Get our Free E-newslettersGet our Free E-newsletters
Kiplinger logoLink to homepage
Get our Free E-newslettersGet our Free E-newsletters
Subscribe to Kiplinger
Subscribe to Kiplinger
Save up to 76%
Subscribe
Subscribe to Kiplinger
  • Store
  • Home
  • Investing
  • Retirement
  • Taxes
  • Personal Finance
  • Your Business
  • Wealth Creation
  • More
    • Podcasts
    • Economic Outlooks
    • Tools
  • My Kiplinger
    • Kiplinger's Personal Finance Magazine
    • The Kiplinger Letter
    • The Kiplinger Tax Letter
    • Kiplinger's Investing for Income
    • Kiplinger's Retirement Report
    • Store
    • Manage My E-Newsletters
    • My Subscriptions
  • Home
  • business
  • small business
  • small business loans
small business loans

7 Ways PPP Loans Just Got Better

The Paycheck Protection Program Flexibility Act makes a number of changes to the popular small-business loan program. See how your business might benefit from the improvements.

by: Rodrigo Sermeño
June 5, 2020

Getty Images

The CARES Act, which was signed into law on March 27, 2020, provided much-needed economic relief to businesses and employees affected by the COVID-19 pandemic. One of the CARES Act's key components was the Paycheck Protection Program (PPP), which offers forgivable loans to small businesses so that they can make their payrolls during the pandemic. However, the CARES Act included a number of restrictions that have hampered the effectiveness of the program.

But now there's some good news for small business owners: President Trump signed the Paycheck Protection Program Flexibility Act (PPPFA), which gives borrowers additional time and flexibility to use PPP loan proceeds. The legislation zipped through Congress with bipartisan support, and there's high hopes that the PPPFA will provide an additional boost for small businesses trying to claw their way out of the pandemic-induced economic crisis.

We've listed 7 of the most significant changes from the PPPFA. Read on to see how your business might benefit from the improvements.

  • Answers to PPP Loan FAQs (Now That There's Fresh Funding for the Loans)

1 of 7

Loan Maturity Date

Getty Images

Under the CARES Act and Small Business Administration regulations, the term of any unforgiven portion of a PPP loan is two years from origination. The PPPFA extends the maturity of PPP loans from two years to five years. The extended repayment period applies only to PPP loans made after June 5, 2020, but lenders and borrowers can renegotiate the maturity of any previously existing PPP loan.

  • The Stunning IRS Ruling That May Bankrupt Small Businesses That Took PPP Loans

2 of 7

Deadline to Use Loan Proceeds

Getty Images

Under the CARES Act, PPP loans don't have to be repaid to the extent the borrowed money is used to cover the first eight weeks of the business's payroll costs, rent, utilities, and mortgage interest. However, current PPP borrowers can now choose to extend the eight-week period to 24 weeks, or they can keep the original eight-week period. New PPP borrowers will automatically have a 24-week period, but the use period can't extend beyond December 31, 2020.

  • Don't Let the Drama Surrounding PPP Distract You from Running Your Business

3 of 7

Forgivable Uses of Loan Proceeds

Getty Images

Originally, PPP borrowers had to use at least 75% of loan proceeds for payroll costs. Borrowers who failed to satisfy this requirement had their loan forgiveness amount reduced. However, under the PPPFA, the 75% threshold is now reduced to 60%. As a result, borrowers can now use up to 40% of PPP loan proceeds for nonpayroll costs, such as rent, utility and mortgage-interest payments.

  • 8 Tips and Warnings on PPP Loan Forgiveness

4 of 7

Rehiring Workers

Getty Images

The amount of a PPP loan that is forgiven is generally reduced if the borrower cuts back on the number of "full-time equivalent" (FTE) employees during the eight-week or 24-week coverage period. However, this rule doesn't apply for a significant decrease in employment and/or wage levels between February 15 and April 26, 2020, if the number of workers and wage levels are restored by June 30, 2020. The new law extends this deadline from June 30 to December 31, 2020.

  • 7 CARES Act Tax Breaks for Businesses

5 of 7

Inability to Rehire Workers or Return to Full Operation

Getty Images

The PPPFA also adds a new exception to the loan forgiveness reduction rules. Now, the amount of a PPP loan that is forgiven won't be reduced due to the borrower's failure to restore FTE levels by December 31, 2020, if, in good faith, the business can document an inability to:

  • Rehire people who were employees on February 15, 2020, and hire similarly qualified employees for unfilled positions by Decmber 31, 2020; or
  • Return to its pre-February 15, 2020, level of business activity because it's complying with COVID-19 regulations or guidance issued by the Department of Health and Human Services, Centers for Disease Control and Prevention, or Occupational Safety and Health Administration between March 1 and December 1, 2020.

These exemptions are important for businesses that are unable to return to full operation because of restrictions on customer capacity or similar reopening restrictions.

  • The Employee Retention Tax Credit Helps Keep Workers Working

6 of 7

Loan Deferral Period

Getty Images

The CARES Act allows borrowers to defer payment of PPP loan amounts for six months from disbursement of the loan. The PPPFA extends the deferral period until the date that the amount of loan forgiveness is determined. If the borrower doesn't apply for loan forgiveness, the business must begin making payments 10 months after the last day of the eight- or 24-week loan use period.

  • 5 HEROES Act Provisions with a Good Chance of Becoming Law

7 of 7

Payroll Tax Deferral

Getty Images

The CARES Act permits a business to delay payment of employer payroll taxes through December 31, 2020 (payments are due over the following two years). However, the CARES Act did not permit PPP borrowers to take advantage of this benefit. The new law removes this restriction, so any PPP borrower can now delay payment of its payroll taxes like other businesses.

  • The Coronavirus at Work: Your Legal Questions Answered
  • Coronavirus and Your Money
  • small business loans
  • small business
Share via EmailShare on FacebookShare on TwitterShare on LinkedIn

Recommended

COVID-19-Weary Business Owners Can Win by Adopting the Right Mindset for a Sale
small business

COVID-19-Weary Business Owners Can Win by Adopting the Right Mindset for a Sale

Your business has survived the pandemic, but it’s taken a toll. Here are some reasons why now may be a good time to sell, and some points to keep in m…
March 31, 2021
PPP Loan Basics for Small Business Owners
Coronavirus and Your Money

PPP Loan Basics for Small Business Owners

Although uncertainty and confusion have surrounded the Paycheck Protection Program since its launch, that shouldn't stop small business owners from pa…
March 30, 2021
Add a VPN to Surf the Internet Safely
Technology

Add a VPN to Surf the Internet Safely

To help you fight identity theft, consider adding a VPN.
March 20, 2021
4 Ways to Keep an Employee's Divorce from Hurting Your Business’s Bottom Line
Divorce

4 Ways to Keep an Employee's Divorce from Hurting Your Business’s Bottom Line

When one of your workers goes through a divorce, like it or not, your company can get pulled into the fray. It’s in your best interest (as well as the…
March 16, 2021

Most Popular

The Perfect Storm for Retirees
retirement planning

The Perfect Storm for Retirees

Today’s retirees could face a perfect storm because they are living longer and spending more time in retirement, while at the same time losing access …
April 18, 2021
The Wrong Way to Achieve Wealth
personal finance

The Wrong Way to Achieve Wealth

For some down-to-earth, basic advice on money and life, I have a book to recommend: “Your Total Wealth: The Heart and Soul of Financial Literacy.”
April 17, 2021
Child Tax Credit 2021: Who Gets $3,600? Will I Get Monthly Payments? And Other FAQs
Coronavirus and Your Money

Child Tax Credit 2021: Who Gets $3,600? Will I Get Monthly Payments? And Other FAQs

People have lots of questions about the new $3,000 or $3,600 child tax credit and the advance payments that the IRS will send to most families in 2021…
April 14, 2021
  • Customer Service
  • About Us
  • Advertise With Us (PDF)
  • Privacy Policy
  • Cookie Policy
  • Kiplinger Careers
  • Accessibility
  • Privacy Preferences

Subscribe to Kiplinger's Personal Finance

Be a smarter, better informed investor.
Save up to 76%Subscribe to Kiplinger's Personal Finance
Dennis Publishing Ltd logoLink to Dennis Publishing Ltd website
Do Not Sell My Information

The Kiplinger Washington Editors, Inc., is part of the Dennis Publishing Ltd. Group.
All Contents © 2021, The Kiplinger Washington Editors

Follow us on InstagramFollow us on FacebookFollow us on TwitterConnect on LinkedInConnect on YouTube