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New Law Makes PPP Loans More Flexible for Borrowers

Services: Tax


While many business owners scrambled to qualify for and receive a Paycheck Protection Program (“PPP”) loan, the realization set in that the loan period to use the funds was actually quite short, only an 8 week window, and came with significant reporting requirements. Some business owners were still waiting on funds as June approached, and the period to restore their workforce levels and wages to pre-pandemic levels required for full forgiveness was June 30th. While June 30 remains the deadline for applying to receive a PPP loan, fortunately, the dilemma of the short timeline for utilizing funds has now been addressed by the Paycheck Protection Program Flexibility Act of 2020 (“PPPFA”). This Act is effective as of June 5, 2020. As a result, note the following positive changes to the existing CARES Act provisions of the PPP:

As noted, many questions remain unanswered and the SBA and Treasury will be issuing additional guidance for interpreting this new Act and other guidance previously set forth. For example, note that currently any expenses paid with PPP funds that are forgiven are not tax deductible. However, the CARES Act provides that receipt of the loan is tax-free. Many legislators support changing the position on deductibility, but that has yet to get passed.

Borrowers will need to complete Form 3508 and submit to their lender in order to request forgiveness; it is NOT automatic. It is important to keep detailed records on headcount (FTEs), payroll costs, and other expenses paid by the loan proceeds. Please consult your tax advisor regarding completion of this form and recommendations for proper documentation. HPG would be happy to assist.