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Written by Jacob Merkley on September 2, 2020

PPP Loan program vs PPPFA

Have you been confused about the differences between the PPP and PPPFA? They are similar and different in their own ways. Let’s review each and make sure that you are taking advantage of the benefits of both for your construction and trade business during these challenging times.

PPP Loan Program

The PPP Loan Program was created as a Small business Administration 7(a) loan program by Section 1102 of the CARES Act. At its core, this loan program was designed to help small businesses that were struggling or would start struggling as a direct result of the Coronavirus pandemic here in the United States.

Any small business that would have a significant reduction of operating income OR as would be negatively impacted a result of government shutdowns would be eligible to receive a loan. Based on stipulations that the loan should be paid for namely employee salary, rent, and utilities, a business could potentially get all of the loan forgiven.

Section 1102 originally specified the covered period for the PPP Loan program from February 15, 2020 until June 30, 2020. But on June 11, the SBA issued an Interim Final Rule (IFR) (SBA-2020-0035) entitled Business Loan Program Temporary Changes; Paycheck Protection Program – which basically amended some of the covered period rule and other provisions, such as the loan maturity, deferral of loan payments, and forgiveness provisions to conform to the PPPFA which is the Paycheck Protection Program Flexibility Act of 2020. 

We’ll talk about the PPPFA here in a second, but first I wanted to share some data about the loan program from the SBA.

As of July 6, nearly 5,500 lenders made 4.9 million loans with an average of $106,000, totaling $521 billion in funding for small businesses that might have otherwise failed. According to the SBA, these loans went to companies and helped preserve over 51 million jobs nationwide. That’s about 84% of the nations small business payroll.

On a microeconomic level within the construction and trade industry, I evaluated the SBA data just on loans that were above $150,000. I recognize many of you took loans less than that, but just looking at loans above $150,000 there were 85,679 construction companies that requested a loan, with a minimum industry total loan valuation of almost 35 billion dollars (34,981,200,000) This chart shows how many loans were taken out in any given state.

I like diving into data for our industry and thought it might peak your interest as well.

PPPFA Changes

The new Paycheck Protection Program Flexibility Act of 2020 (PPPFA) provides businesses with greater flexibility when it comes to spending PPP funds without compromising their eligibility for loan forgiveness.

This Act was passed by Congress on June 3, 2020. Here are a few of the most important pieces to this new bill that change certain components of the PPP program:


The covered period of those businesses effected by the pandemic was changed from June 30, 2020 to December 31, 2020.


The forgiveness covered period received an extension to 24 weeks. Originally under the CARES Act, the forgiveness covered period ran from the date of the PPP loan was funded and ended 8 weeks later. The PPPFA amended the definition of the forgiveness covered period to begin on the date of the loan is funded and to end 24 weeks later or on December 31, 2020 whichever occurs first.


Maturity Date for Some PPP Loans – The PPPFA extended the maturity of loans first made after its enactment to five years instead of two. For these purposes, the date the loan is “made” is the date that the SBA assigns a loan number to the loan. And a PPP borrower whose loan was made prior to June 5, 2020 still can negotiate with its lender and they can mutually agree to extend the maturity date to five years.


Lowered Percentage of Forgiveness Amount for Payroll Costs – The PPPFA lowers the percentage of the PPP loan proceeds that must be applied toward payroll costs from 75% to 60%. This was designed to help businesses have more flexibility to use some of this money to pay for other overhead expenses.


Payroll Tax Deferment – As it was originally written, the PPP provision prevented an employer that had received a PPP loan from deferring additional payroll taxes once their loan forgiveness was confirmed by the lender. The PPPFA now retroactively eliminates that restriction. An employer may now continue to defer the payroll tax for the entire period from march 27, 2020 to December 31, 2020 regardless of whether it has a PPP loan forgiven during this period.


A business can also defer payroll taxes with no penalty or risk to their loan forgiveness.


Perhaps the biggest change is that this new bill established a safe harbor provision for businesses looking to receive loan forgiveness. Basically, businesses that have been unable to return to the level of business activity they had before the pandemic due to compliance with health and safety guidelines will be eligible for forgiveness.

PPP Loan Forgiveness Process

If you took loan money and have exhausted the funds, I think the best time to apply for forgiveness is right away. There’s no actual deadline that exists to apply for forgiveness, however if a second round of PPP funding comes around, it’s likely that a requirement will be to have already exhausted the original PPP funds and have it documented. In my mind documentation in the form of a forgiveness application seems appropriate.

Most companies at this point have spent the money in accordance with the loan provisions and they are ready to be done with the government telling them what they can and can’t do. They might also want to receive a definitive answer that their loan is indeed forgiven.

  1. Fill out a PPP Forgiveness application form and submit that to your lender. If you had a PPP loan priority the PPPFA being signed, you can choose to use the original 8-week period instead of the 24-week period if you choose to. After submitting your application, your lender is required to provide a response within 60 days of your submission.
  2. In the meantime, you should start preparing your records and gathering documents. Your lender may ask for documents verifying the number of full-time equivalent employees on payroll with pay rates for certain periods. This could include payroll reports, payroll tax filings such as your quarterly Form 941, documents to verify retirement and health insurance contributions, documents to verify utilities and rent payments that were made, and income/payroll/and unemployment insurance filings from your state.

Forgiveness for your loan will truly come down to good record keeping and bookkeeping. Keeping track of eligible expenses during the 8 week of 24 week periods are required to get that forgiveness. Also, the SBA will want to see completed financial statements at the end of your calendar or fiscal years, so make sure you are taking the steps to have those ready as well. 


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