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June 15, 2020

SBA Officially Changes PPP Rules, Including On Criminal Backgrounds

On June 12, the U.S. Small Business Administration and the U.S. Department of the Treasury issued new and revised guidance for the Paycheck Protection Program (PPP). The new rules implement provisions from legislation signed into law on June 5.

As Connecting the Dots explained last week, this law:

  • Extends the time that PPP funds have to be used, from eight weeks to 24;
  • Extends eligibility for the program from June 30, 2020 to December 31, 2020;
  • Extends the date that businesses have to rehire employees, and qualify for purposes of loan forgiveness, from June 30, 2020 to December 31, 2020;
  • Extends the period for paying back portions of the loans that are not forgiven from two years to at least five years;
  • Changes the SBA-imposed requirement that 75 percent of PPP loan proceeds be used to pay for payroll expenses and no more than 25 percent on rent and utilities to at least 60 percent of loan must be used for payroll; and
  • Ensures that successful PPP applicants would now be eligible to defer 2020 payroll taxes, something that was prohibited under the program as originally written.

The SBA also announced that the eligibility threshold for those with felony criminal histories has been changed. Specifically, the SBA and lenders now will look back only one into potential borrowers’ criminal records instead of five years. The examination still will look at whether potential borrowers have been convicted, pleaded guilty, pleaded nolo contendere, or have been placed on any form of parole or probation (including probation before judgment).

The period remains five years for felonies involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance, however. SBA issued revised PPP application forms to conform to these changes.  The guidance and revised application forms are available on SBA’s and Treasury’s websites.

SBA will issue additional guidance regarding loan forgiveness and a revised forgiveness application to implement the PPPFA in the near future. Click here to access the new borrower application resulting from these changes.