06/25/2020
Below is some great information on Interim Final Rule #20 regarding forgiveness of PPP loans!
• Makes clear that 6/30 is the last day on which a lender can obtain an SBA loan number for a PPP loan.
• Adds references to new alternate Loan Forgiveness Application, SBA Form 3508EZ.
• Confirms the rules around EIDL Advance (Grant): If the borrower applied for an EIDL loan & received the advance, that portion will be subtracted from the PPP loan forgives amount. This calculation is completed by the SBA on the back end (not by the lender or borrower on the application). Example: borrower receives a $5k EIDL advance & $50k PPP. At the time of forgiveness application it’s determined the borrower is to receive forgiveness for the full $50k; however the SBA will pay $45k ($50k- $5k EIDL advance). The remaining $5k will either be termed out for up to 5 years or paid in full by the borrower.
• Amends documentation requirements to provide separate lists depending on whether forgiveness application filed using SBA Form 3508 or using 3508EZ – applies to requirements related to borrower submission, lender review, and lender submission to SBA with both approval and decline recommendations.
• Extends loan maturity from 2 years to 5 years for loans approved by SBA on or after 6/5 AND when mutually agreed to by lender and borrower for loans approved prior to that date.
• Changes from 25% to 40% the maximum percentage of a forgiveness amount that can be approved for nonpayroll costs.
• Extends the “covered period” from original 8 weeks to 24 weeks (but not later than 12/31) BUT allows borrowers with loans approved prior to 6/5 to elect to continue to use the original 8-week period.
• Extends to 12/31 the date by which borrowers may eliminate reductions in full-time equivalent employees or in employee salary and wages without causing a reduction in forgiveness amount.
• Adds additional exemptions to reductions based on employee availability and business activity as provided in new Act and continues exemptions to the reduction rules as previously adopted by Treasury/SBA.
• Adds new requirement that if SBA remits full amount of loan to lender (loan “fully forgiven”), lender must mark loan note as paid in full and report PIF status on next 1502 report it files with SBA.
• Extends deferral period from 6 to 10 months after the last day of the covered period.
• Allows borrowers, once it has used all of the loan proceeds for which it is requesting forgiveness, to submit its loan forgiveness application “any time on or before the maturity date of the loan”, including before the end of the covered period subject to the forgiveness reductions required by the Acts and IFRs.
• Specifies that if borrower does not apply for forgiveness within 10 months, or if SBA determines loan is not eligible for forgiveness, deferment is terminated, and lender must notify borrower to begin making loan payments.
• Deletes provision requiring that, if forgiveness amount paid to lender exceeds outstanding loan balance, lender must refund difference to borrowers. [Editorial note: change apparently made because extension of deferment period should mean that borrower will not make payments that would reduce loan balance prior to forgiveness payment by SBA.]
• Revises caps on amount of loan forgiveness available for owner-employees and self-employed individuals’ own payroll compensation.
• Provides new general guidance regarding a borrower’s rights, to, in some circumstances, request that its lender reconsider a decision to deny a forgiveness application or to request that SBA review the lender’s decision to deny the forgiveness application.
• Deletes provision in IFR 15 which stated that SBA will issue additional procedures on the process for the advance purchase of PPP loans.
