PPP – Revisions to Loan Forgiveness and SBA Loan Review Procedures
The latest Interim Final Rule on PPP Loan Forgiveness and SBA Loan Review Procedures that was published June 22, 2020 highlights much of what was already outlined in our June 12, 2020 Client Alert “SBA Issues Updates to Initial Final Rule on Paycheck Protection Program” (link provided below). Here is a brief summary of the information:
- 25% to 40% for covered non-payroll expenses
- Extended maturity date by mutual agreement between lender and borrower
- Deferral period extended to the date SBA remits forgiveness amount to lender
- Process for loan forgiveness
- Covered period extended from 8 to 24 weeks (loans prior to June 5th can elect to use original 8 week period)
- Caps on loan forgiveness for owner-employees and self-employed payroll compensation
- Change from June 30th to December 31st for elimination of the FTE reduction
- Inability to rehire employee or a similarly qualified employee
- New EZ Loan Forgiveness form for some borrowers
The latest Interim Final Rule provides some new information as well:
- A borrower may submit a loan forgiveness application any time on or before the maturity date of the loan – including before the end of the covered period – if the borrower has used all of the loan proceeds for which the borrower is requesting forgiveness. If the borrower applies for forgiveness before the end of the covered period and has reduced any employee’s salaries or wages in excess of 25% the borrower must account for the excess salary reduction for the full 8-week or 24-week covered period.
- The exemption for borrowers that have reduced the hours of an employee and offered to restore the reduction in hours is being retained. So, a borrower may exclude any reduction in full-time equivalent employee headcount that is attributable to an individual employee if:
- The borrower made a good faith, written offer to restore the reduced hours of such employee;
- the offer was for the same salary or wages and same number of hours as earned by such employee in the last pay period prior to the reduction in hours;
- the offer was rejected by such employee; and
- the borrower has maintained records documenting the offer and its rejection.
- The guidance clarifies that the statutory exemption pertaining to loan forgiveness reduction due to compliance with requirements established or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the CDC or OSHA related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19, now includes both direct and indirect compliance with COVID Requirements or Guidance, because a significant amount of the reduction in business activity stemming from COVID Requirements or Guidance is the result of state and local government shutdown orders that are based in part on guidance from the federal agencies.
- Borrowers shall not receive forgiveness without submitting all required documentation to the lender.
LGT’s June 12, 2020 Client Alert-SBA Issues Updates to Initial Final Rule on Paycheck Protection Program:
Interim Final Rule on Revisions to Loan Forgiveness Interim Final Rule and SBA Loan Review Procedures Interim Final Rule: https://home.treasury.gov/system/files/136/PPP--IFR--Revisions-to-Loan-Forgiveness-Interim-Final-Rule-and-SBA-Loan-Review-Procedures-Interim-Final-Rule.pdf
Guidance on Refinance of EIDL Loans with PPP Loan Proceeds and Lender Remittance of EIDL Refinance Proceeds to SBA: https://home.treasury.gov/system/files/136/Guidance-on-Refinance-of-EIDL-Loans-with-PPP-Loan-Proceeds-and-Lender-Remittance-of-EIDL-Refinance-Proceeds-to-SBA.pdf
The Attorneys at Levene Gouldin & Thompson, LLP are available to provide advice and counsel concerning these new statutory obligations and other matters related to COVID-19.