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What Pharmacies Need to Know About the New PPP Loan Forgiveness

CARES Act: Everything Independent Pharmacies Need to Know PPP Loan Forgiveness

June 25, 2020

Inside: Changes in the law make PPP loan forgiveness more accessible to small businesses.

In March, Congress passed the CARES Act. It threw struggling small businesses a lifeline in the form of the Paycheck Protection Program.

However, many business owners found the PPP had too many restrictions to be useful, and the program was recently amended through the Paycheck Protection Program Flexibility Act.

If you’ve taken out a PPP loan for your pharmacy, this is what you need to know about the new law and how it affects your prospects for loan forgiveness.

More time to spend funds

The PPP Flexibility Act extends the “covered period” that businesses have to spend their PPP funds in order for the loan to be forgiven. The initial CARES Act called for funds to be spent within eight weeks.

Now, businesses have 24 weeks or until December 31, 2020, to use PPP funds on eligible expenses. If you’ve already received a PPP loan and don’t need the extension, you can elect for your covered period to remain 8 weeks.

Reduced payroll requirements

The CARES Act required that businesses use 75 percent of PPP funds for payroll costs in order to be eligible for loan forgiveness.

Under the new provisions, only 60 percent of your loan needs to be used for payroll costs. That means businesses have more money to use on other eligible expenses. These include interest on a covered mortgage obligation, rent, or utility payments.

If businesses don’t hit that 60 percent threshold, they are still eligible for partial forgiveness, but the whole loan will not be forgiven.

New rehiring guidelines

In addition to extending the covered period, the PPP Flexibility Act also extends the deadline to restore your employee headcount. Previously, businesses were expected to restore their employee headcount to pre-pandemic levels by June 30, but now, you have until the end of the year.

There are also new rules around rehiring that give more flexibility to businesses if an employee rejects an offer of rehire. In order to remain eligible for full loan forgiveness, businesses must:


As long as you keep these records, you won’t face reduced loan forgiveness if an employee doesn’t want their job back.

Lengthened loan maturity

Under the PPP Flexibility Act, new PPP loans will mature in a minimum of five years from the date of application instead of the initial two-year maturity laid out by the CARES Act.

If you received a PPP loan before June 5, 2020, your loan will still mature in two years. However, you can renegotiate with your lender to lengthen it.

The new law also extends payment deferral. Initially, payments could be deferred for a year, but now, payments of principal, interest, and fees can now be deferred until forgiveness is remitted. However, borrowers have to apply for forgiveness within 10 months after their covered period ends or they will be on the hook to make payments.

Additional safe harbor

In addition to granting safe harbor for businesses that have been unable to rehire employees, businesses can also remain eligible for full loan forgiveness if they are able to prove that they’ve been unable return to their pre-pandemic levels of business activity because they are complying with healthcare guidelines from the federal government.

If you’re following recommendations from the CDC, HHS, or OSHA regarding sanitation, social distancing, or other safety procedures related to COVID-19, and those rules have a detrimental effect on your business, you can still get loan forgiveness even if you don’t meet the law’s other requirements.


An Independently Owned Company Serving Independent Pharmacies 

PBA Health is dedicated to helping independent pharmacies reach their full potential on the buy side of their business. The company is a member-owned organization that serves independent pharmacies with group purchasing services, expert contract negotiations, proprietary purchasing tools, distribution services, and more.

An HDA member, PBA Health operates its own NABP-accredited (formerly VAWD) warehouse with more than 6,000 SKUs, including brands, generics, narcotics CII-CV, cold-storage products, and over-the-counter (OTC) products.

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