New Guidance Regarding PPP Loan Forgiveness

May 27, 2020

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On May 22, the Small Business Administration (SBA), in conjunction with the U.S. Treasury, released additional guidance for recipients of loans through the Paycheck Protection Program (PPP). A recent article from the Journal of Accountancy examines the details of the new release.

The SBA issued two new interim final rules, one regarding requirements for loan forgiveness and the other covering procedures for loan review and responsibilities of borrowers and lenders. The article pulls out highlights from the new releases.

From the new interim final rule governing requirements for loan forgiveness:

  • Creation of an alternative method for defining the start period of a business’ eight-week cycle for using PPP funds.
  • Further explanation regarding bonuses and hazard pay—they are eligible for loan forgiveness, as long as the amount does not exceed an employee’s pro-rated annual salary of $100,000.
  • Creation of loan forgiveness caps for owner-employees and payroll compensation for self-employed individuals.
  • Further explanation regarding the timing of non-payroll costs and their eligibility for loan forgiveness.
  • A restatement of guidelines for excluding employees who refuse to be rehired from loan forgiveness reduction calculations. Borrowers must notify their state’s unemployment office of rejected re-employment offers within 30 days.
  • Guidance regarding the definition of full-time for the purposes of PPP loan forgiveness and for calculating FTEs for non full-time employees.
  • A statement that PPP loan recipients may restore forgiveness by rehiring employees and reversing any salary and wage reductions.

From the new interim final rule governing loan review:

  • A statement that the SBA has the authority to review any PPP loans.
  • Guidance regarding a borrower’s ability to appeal SBA eligibility determinations—borrowers have 30 days from when they receive the SBA’s decision.
  • Requirement that lenders must make application decisions within 60 days of receipt.
  • Further explanation regarding the ability of lenders and the SBA to ask borrowers questions.
  • A statement regarding lender fees for PPP loans—lenders will not be paid for loans that are deemed ineligible.

For further details, including information on potential legislation that would impact the PPP, click here to read the article in full.