New guidance has emerged from the Small Business Administration with another interim final rule—this new rule clarifies certain key changes made to the Paycheck Protection Program (PPP) by the Paycheck Protection Program Flexibility Act (PPPFA) signed into law on June 5, including:
- Extending the period in which expenses paid with a PPP loan could be eligible for loan forgiveness from 8 to 24 weeks from a loan’s origination (not to extend beyond December 31, 2020).
- Allowing borrowers who received a PPP loan before enactment of the June 5 legislation to elect that the covered period run for 8 (vs. 24) weeks
- Clarifying the amount of loan forgiveness can be up to the full principal amount of the loan plus accrued interest and caps the payroll costs during the covered period to $46,154 per employee (24 week covered period) or $15,385 per employee (8 week covered period) plus covered benefits for employees (but not owners).
- Clarifying the maximum amount of forgiveness for S-Corporation Shareholders, general partners, and self-employed individuals is determined by calculating owner compensation replacement limited to 2.5/12 of 2019 net profit up to $20,833 (24 week covered period) or limited to 8/52 of 2019 net profit up to $15,385 (8 week covered period).
- Lowering the requirements that 75% of a borrower’s loan proceeds must be used for payroll costs and that 75% of the loan forgiveness amount must have been spent on payroll costs during the 24-week loan forgiveness covered period to 60% for each of these requirements. If a borrower uses less than 60% of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness, subject to at least 60% of the loan forgiveness amount having been used for payroll costs.
- Extending the deferral period for borrower payments of principal, interest, and fees on PPP loans to the date that SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period).
- Providing a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees for borrowers that are unable to return to the same level of business activity the business was operating at before February 15, 2020, due to compliance with requirements or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to worker or customer safety requirements related to COVID–19.
Download a copy of the June 16, 2020 revised Loan Forgiveness Application Instructions,
Download a copy of the revised Loan Forgiveness Application Form 3508EZ.
The last day which a PPP loan application can be approved remains June 30, 2020.
The PPP loan forgiveness process is time consuming and complicated, even more so than the PPP application process itself - calculations are complex and supporting documentation needs to be thorough and succinctly compiled. If you have any questions regarding your PPP loan or need assistance completing your loan forgiveness application and calculating your loan forgiveness amount, please contact John Priola.
We will continue to keep you updated on the changes to this program as they are released.
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