WILMIC News & Risk Management Articles

SBA Clarifies PPP Loan Forgiveness Rules

The Small Business Administration (SBA) filed another Interim Final Rule (IFR) that includes new revisions made from the Paycheck Protection Program Flexibility Act that was signed into law on June 5, 2020.

The new update, which is scheduled to be published on June 19, 2020, includes the following changes to the PPP program:

Extended Maturity Date

For loans made after June 5, 2020, the SBA has extended the maturity date of the loan from two years to five years. The maturity date can also be extended for loans made before June 5, if the borrower and lender mutually agree.

Loan Forgiveness Period

The covered period for the loan forgiveness was extended from eight weeks to 24 weeks. However, borrowers with loans taken before June 5th can still choose the eight-week period.

Payroll Expense and Forgiveness

The Act reduced the amount that you needed to spend on payroll in order to obtain forgiveness from 75% to 60%. Originally, the Act made it sound like if you didn’t get to 60% in payroll expenses, you didn’t get any forgiveness. However, the SBA and Treasury later clarified even if you didn’t get to 60% in payroll expenses you could still obtain partial forgiveness.

FTE Replacement and Salary Restoration

The Act extended the date to replace full-time equivalent employees (FTEs) and restore salaries from June 30, 2020 until December 31, 2020.

It also allowed relief for those businesses that have a loss of FTEs because of Covid-19 related restrictions that prevent the same level of business activity through the end of the year. This is a significant help to those businesses who still have not been able to fully reopen because of stay-at-home restrictions.

SBA Resources