On May 22, the Small Business Administration and Treasury Department released additional guidance concerning the potential forgiveness of loans made under the Paycheck Protection Program established by the federal CARES Act to help employers navigate the COVID-19 crisis.
In these two Interim Final Rules, the SBA and Treasury have outlined the requirements for loan forgiveness eligibility and the process by which forgiveness will be determined. View the Interim Final Rule on PPP Loan Forgiveness Requirements and Interim Final Rule on PPP SBA Loan Review Procedures and Related Borrower and Lender Responsibilities.
As outlined in these documents, lenders are required to issue decisions regarding borrowers’ forgiveness applications within 60 days of receipt, and the SBA then has 90 days during which to pay the forgiveness amount. The rules reiterate non-payroll costs cannot exceed 25% of the loan proceeds to qualify for forgiveness and spells out salary, wages and commission payments to furloughed employees, bonuses or hazard pay are eligible for payroll costs under the $100,000 annual limit per employee. The rules also provide a formula for reducing the loan forgiveness amount depending on the number of employees and salary retained by the end of the eight-week covered period and define full-time employees as working 40 hours per week.
Additionally, the SBA may review any PPP loan the administrator deems appropriate for borrower eligibility; loan amounts and use of proceeds; and the loan forgiveness amounts. If the SBA begins a review of any PPP loan size, the lender will be notified and must notify the borrower within five days of receipt. If the SBA determines the borrower was ineligible for the loan, the lender processing fees are subject to clawback. Borrowers will have the opportunity to appeal the ruling.
The issuance of the Interim Final Rules follows the May 15 release of the Loan Forgiveness Application and Instructions.
NRCA notes Congress currently is considering legislation that, if enacted, would make changes to the PPP program, including extension of the eight-week period during which the funds must be used, as well as modification of the requirement that 75% of PPP funds be used for payroll-related expenses. Congress may act soon, and NRCA will provide further information as needed.
