May 18, 2020

Changes, New Guidance For SBA Paycheck Protection Program

The U.S. Small Business Administration’s (SBA) Paycheck Protection Program (PPP) continues to have enough funds to allow banks to make forgivable loans available to businesses that have fewer than 500 employees and that are suffering as a result of the COVID-19 pandemic.

Several new details regarding the program emerged last week.

On Friday, May 15, the SBA and the U.S. Treasury finally issued the PPP loan forgiveness application. In a press release, the SBA also noted it will “soon issue regulations and guidance to further assist borrowers as they complete” these applications. The forgiveness application, which is available here, is straightforward and comprehensive, and makes it clear that borrowers need to use 75 percent of their PPP loan to make payroll in order for it to be forgiven.

The form and its instructions also include several measures to simplify the process and reduce compliance burdens, including:

  • Options to calculate payroll costs using an “alternative payroll covered period” that aligns with borrowers’ regular payroll cycles;
  • Flexibility to include eligible payroll and non-payroll expenses paid or incurred during the eight-week period after receiving their PPP loan;
  • Step-by-step instructions on how to perform the calculations required by the CARES Act to confirm eligibility for loan forgiveness;
  • Borrower-friendly implementation of statutory exemptions from loan forgiveness reduction based on rehiring by June 30; and
  • A new exemption from the loan forgiveness reduction for borrowers who have made a good-faith, written offer to rehire workers that was declined

As a reminder, the deadline for borrowers to give back their PPP loans without penalty expired on May 18, 2020. Unless SBA changes this rule at some point, borrowers can no longer returns fund without penalty.

Also last week: as Bloomberg explains, the SBA and Treasury issued guidance saying companies that accepted loans of more than $2 million under the PPP but are later deemed ineligible can repay the money without legal consequences. This announcement backs off an earlier assertion that said the government could pursue criminal legal action if borrowers were deemed ineligible.

SBA’s Frequently Asked Questions about the PPP are here. Click here for more information from MSCI about the PPP, including how it works with the Employee Retention Tax Credit.