PPP UPDATE: covered period extended to 24 weeks! 5 year repayment, 60% payroll minimum

Important PPP update for 2021

On December 22, 2020, Congress passed a bill renewing funding under the CARES Act, including an additional $284 billion earmarked for America’s struggling small businesses. The rules and application process for PPP loans and forgiveness have been modified, with more businesses eligible for PPP loans, a simplified application process, and PPP loans will now cover additional expenses, including operations expenditures, property damage costs, supplier costs, and worker protection expenditures.

In this 2-minute read:

  • Updates to PPP loan forgiveness rules
  • Extended repayment period for PPP loans
  • New rules on payroll expenditure minimums for PPP loans
  • Breakdown of Paycheck Protection Flexibility Act

The Senate passed H.R.7010, known as the Paycheck Protection Flexibility Act, on June 3, 2020. The bill was signed into law by President Trump on June 5, 2020.

Demand for Paycheck Protection Program (PPP) loans by small businesses has slowed somewhat, as potential borrowers fear being unable to meet the requirements for loan forgiveness, employee rehiring, or are simply worried they may not qualify.

The new legislation makes several important modifications to the PPP program under the CARES Act, intended to adjust for current economic conditions and allow more small businesses to achieve full forgiveness of their PPP loan.

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List of relevant updates to PPP loan forgiveness requirements

  • As of the date of the Act’s enactment, PPP loans with remaining unforgiven loan amounts will now have a minimum maturity of 5 years (previously 2 years). Borrowers and lenders may otherwise independently agree to alter the terms of their loans to conform to this new requirement, if their loans have been agreed upon prior to the passage of the PPPFA
  • The interest rate remains 1%.
  • The “covered period” is extended to 24 weeks; businesses now have up to 24 weeks to spend their PPP funding (extended from 8 weeks)
  • Current PPP borrowers can opt to extend the eight-week period to up to 24 weeks, or they can chose the original eight-week period
  • Payments are deferred until the SBA approves your application for loan forgiveness, or 10 months after the end of your covered period. (Note, interest still accrues during the grace period)
  • Borrowers are now required to spend at least 60% of the funding on payroll costs in order to achieve 100% loan forgiveness. (Previously, the threshold for 100% forgiveness was 75% of PPP funds spent on payroll)
  • The June 2020 legislation included two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they are unable to fully restore their workforce. (Previously, borrowers were still able to exclude from their forgiveness calculations any employees who turned down good faith offers to be restored at the same hours and wages as before)
  • The June 2020 law allows borrowers to still be able to meet forgiveness requirements if could not find qualified employees or were unable to restore business operations to pre-February 15, 2020 levels due to COVID-19 related operating restrictions
  • Businesses that get a PPP loan to may now also delay payment of the employer’s share of their 2020 payroll taxes. This was previously prohibited under the CARES Act 


The Treasury released a new IFR and an “easy” version of the PPP loan forgiveness application on June 17, 2020. Please read the full details here.

Here’s how borrowers decide which forgiveness application to use. You may use Form 3508EZ if:

  • You are self-employed and have no employees; OR
  • You did not reduce the salaries or wages of employees by more than 25%, and did not reduce the number or hours of employees; OR
  • You experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the salaries or wages of employees by more than 25%.

If you don’t fit into any of the above conditions, you will need to complete and submit the full PPP loan forgiveness application.

Basic rules for PPP loan forgiveness as of 2021:

In case you need the basics for PPP loan forgiveness:
First Draw PPP Loans made to eligible borrowers qualify for full loan forgiveness if during the 8- to 24-week covered period following loan disbursement:

  • Employee and compensation levels are maintained
  • The loan proceeds are spent on payroll costs and other eligible expenses; and
  • At least 60 percent of the proceeds are spent on payroll costs

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