On May 15, 2020, the U.S. Department of Treasury (Treasury) and the U.S. Small Business Administration (SBA) released the highly-anticipated Paycheck Protection Program (PPP) Forgiveness Application. The application and corresponding instructions provide some initial guidance for borrowers trying to navigate the forgiveness process. The U.S. Small Business Administration (SBA) is expected to soon issue a new interim final rule (IFR) to supplement the application, which will provide specific information and guidance for both borrowers and lenders on how to apply for, calculate, and process forgiveness applications.
The documents released on May 15, 2020, include several provisions designed to streamline SBA’s forgiveness and compliance processes and provide borrowers with the certainty they need during these unprecedented times. One of more notable measures included provides borrowers with enhanced flexibility to “include eligible payroll and non-payroll expenses paid or incurred during the eight-week period after receiving their PPP loan.” This is important, because based on previous guidance eligible payroll and non-payroll expenses had to be paid and incurred during the effective eight-week period.
Another key provision included created “a new exemption from the loan forgiveness reduction for borrowers who have made a good faith, written offer to rehire workers that was declined.” This is extremely helpful for small businesses such as restaurants who have routinely found it difficult to rehire workers who have been laid off or furloughed because they can make more on unemployment than by returning to work.
Finally, the application and instructions clarified the employee reduction safe harbor and specifically provided that the borrower is statutorily exempt from a reduction in loan forgiveness if the borrower restored its full time employee (FTE) levels by not later than June 30, 2020 to its FTE levels for the pay period that included February 15, 2020. Previous guidance stated that a borrower was only exempt from a reduction in loan forgiveness if it restored its FTE levels as of February 15, 2020 rather than for the pay period including February 15, 2020.
Our COVID-19 Task Force will continue to monitor the ever-fluid PPP loan and forgiveness regulatory process and will provide additional insight and analysis as information becomes available.