Senate Passes Paycheck Protection Program Flexibility Act. Here's What's Changing

The measure extends deadlines and loosens restrictions on how funds are spent.


The Senate passed the Paycheck Protection Program (PPP) Flexibility Act on Wednesday. The measure, which passed the house almost unanimously last week, makes loan forgiveness under the PPP program easier for small businesses.

The new legislation extends several critical deadlines for small businesses hoping to qualify for loan forgiveness. Instead of eight weeks, businesses can spend the money over a period of 24 weeks. The deadline for rehiring workers, once set at June 30, has been extended to December 31. It increases the amount of the loan that can be spent on non-payroll expenses, like rent and utility payments, to 40 percent of the total. Previously, only 25 percent of the loan could be spent outside of payroll in order to qualify for forgiveness. It now awaits the president’s signature.

The Independent Restaurant Coalition (IRC), an industry advocacy group created in response to COVID-19 shutdowns, issued a statement shortly after the Senate vote. “By making Paycheck Protection Program funds more flexible, Congress is giving independent restaurants a fighting chance at reopening. Republicans and Democrats put forward a bill that gives many restaurant owners some hope amidst these unprecedented times,” it reads.

Read more: How Is the CARES Act Going for Restaurants? Not Great

Chefs, restaurateurs, and industry groups like the IRC have been vocal for months about their immediate challenges under the PPP, which was created as part of the larger CARES Act, to address economic fallout from COVID-19. They called the program too restrictive for an industry forced to operate in a limited capacity for the foreseeable future. If a business doesn’t meet the strict qualifications for forgiveness, it must repay the loan at a one percent interest rate over two years, a short timeline for an already struggling business.

In an April interview, Dana Zukofsky, director of accounting firm BDO’s national restaurant practice, said that some businesses were taking the aid while they could get it, knowing they might have to pay it back. “[Operators are] hoping with their fingers crossed that maybe the eight week period gets relaxed a little bit,” she said at the time.

Now that it’s been relaxed, Zukofsky cautions the newly passed legislation isn’t a complete fix. “Although the timeline has been adjusted, there are still quite a few unknowns and opportunities for additional clarity. These adjustments do however afford operators with a bit of breathing room as they await additional updates,” she said.

"It feels like an obvious and justified course of action,” said Joey Rubin, the Los Angeles-based owner at Parade Agency, the organizer of Order Hospitality industry conference. “The conditional timestamp of PPP distribution felt unnecessarily urgent in a time of significantly greater urgency. Hospitality operators need all the tools available to catch up to these extraordinary shifts in business and culture.”

Many operators say the initial rollout of the PPP was flawed. They cited confusion during the application process and unclear guidelines around forgiveness as large companies cashed in on funds earmarked for small businesses. Later, the government asked companies without a verifiable need to return the cash. Many restaurant companies, like Shake Shack, Ruth’s Chris, Sweetgreen, and Potbelly, did return the money. After a second round of funding in late April gave the PPP a $310 billion boost, CNBC reports that $120 billion remains in the fund, in part because of the restrictive terms around forgiveness.

The Independent Restaurant Coalition calls the fixes in the PPP Flexibility Act “only the beginning of a solution,” and reiterates its support of an independent restaurant stabilization fund to provide long-term support.

“At their core, restaurants are restorative for communities and economic engines for cities,” said Rubin. “Giving them a fighting chance feels like an important thing to do.”

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