Rigby Financial Group Blog

Rigby Financial Group Blog

PPP Loan Forgiveness – SBA Issues 2 New Interim Final Rules

28 May 2020

On Friday, May 22, 2020, the Small Business Administration (SBA) published new Interim Final Rules addressing some of the questions raised or remaining following the release of their Paycheck Protection Program (PPP) Loan Forgiveness Application.

To download the PPP Loan Application Forgiveness package, please click here.

The new Interim Final Rules provide clarity on several points, including:

• Alternative 8-week payroll covered period – this applies to borrowers with weekly, bi-weekly, or other payroll periods more frequent than semi-monthly. A borrower may elect to begin their 8-week period on the first payroll date following receipt of their PPP loan proceeds.

• Bonuses and hazard pay have been clarified as payroll costs eligible for forgiveness, as are salary, wage, or commission payments to furloughed employees. Total eligible compensation, including the above, is capped at $100,000 per year per employee.

• Eligible non-payroll costs (e.g., rent, mortgage interest, utilities) may be paid during the 8-week period. Alternatively, these costs may be incurred during that period and paid on or before the next billing date, even if that date is after the 8-week period has concluded.

• Additional requirements regarding laid-off or furloughed employees who refuse to return to work following a good-faith offer by the borrower. The offer and the refusal must be documented in writing, and the offer must be for the same number of hours and at the same salary or wage as the employee worked and was paid prior to their layoff or furlough. The borrower must inform their State Unemployment Office of such refusal of rehire within 30 days of the former employee’s refusal to accept the borrower’s good-faith written offer. If these requirements are met, these former employees will not be counted against forgiveness of the borrower’s PPP loan debt.

• Per the May 22, 2020, Interim Final Rules, an employee who is “fired for cause, voluntarily resigns or voluntarily requests a schedule reduction,” will not be counted as no longer being employed by the borrower for the “fewer employees” reduction test.

• Lenders are required to determine PPP loan forgiveness eligibility within 60 days of receipt of an application for such forgiveness. The SBA will issue its own determination within 90 days of its own receipt of the application from the lender.

• The SBA may question both borrowers and lenders concerning an application for PPP loan forgiveness. The SBA may review calculations, eligibility, etc., and make its own calculations in order to determine either eligibility for the PPP loan itself or any eligible loan forgiveness. On the other hand, the SBA may simply accept a lender’s certification on a loan forgiveness application.

• Borrowers may appeal an adverse SBA determination within 30 days of receipt. The appeal process has yet to be established; the SBA promises specifics in a later Interim Final Rule.

Meanwhile, bills are being considered, both in the Senate and the House of Representatives, proposing modification to the PPP. The House is expected to vote this week on a standalone bill to extend the “covered period” to 24 weeks and eliminate the requirement that 75% of loan proceeds must be spent on eligible payroll-related costs for forgiveness eligibility.

The corresponding Senate bill also proposes a 24-week “covered period,” and elimination of the “75% Rule.”

We know this is not the final guidance the SBA will issue on PPP loan forgiveness, and that additional legislation may make substantial changes to the rules governing the program. It is, nonetheless, the best we have for the time being, and we recommend that borrowers get started with their preliminary calculations now.

If you are at all uncertain about the PPP Loan Forgiveness Application, please seek guidance from your advisor. You will want to make certain you get your facts and figures in order before submitting your loan forgiveness application to your lending institution.

To view the first new Interim Final Rule on PPP Loan Forgiveness Application, please click here.

To view the second new Interim Final Rule on PPP Loan Forgiveness Application, please click here.

Once again, we recommend that you track your covered expenses and time periods meticulously, and that you gather and maintain documentation verifying the number of full-time equivalent employees and their pay rates (there are several dates for which this one task must be performed), as well as your payments of eligible payroll costs, eligible mortgage and interest payments, rent, and utilities.

Stay tuned for further developments, which will be coming!

If you have questions on the PPP, please click here to email us directly – we are here to help.

Until next Wednesday –

Peace,

Eric

Schedule a free initial consultation