SBA Releases IFR on Revisions to First Interim Final Rule
On June 10, 2020, the U.S. Small Business Administration (SBA) released the Paycheck Protection Program (PPP) - Revisions to First Interim Final Rule. These revisions were released as a response to the enactment of the Paycheck Protection Program Flexibility Act (PPPFA), H.R. 7010, signed into law on June 5, 2020.
The PPPFA included several significant changes to the PPP, which are summarized below.
- Covered Period. The covered period is extended from eight weeks to the earlier of 24 weeks from the date of the first PPP loan disbursement or December 31, 2020. For borrowers of PPP loans originating before June 5, 2020, there is an election to be made for the covered period to be eight weeks.
- Usage of Funds. A minimum of 60 percent of forgivable funds must be used on payroll costs, with a maximum of 40 percent applied to non-payroll expenses. The Treasury & SBA clarified in a recent statement that partial forgiveness is still available for borrowers who do not meet this threshold.
- Extension of Safe Harbor for Compensation and FTE Reductions. Salary or hourly wage reductions or FTE reductions would not reduce forgiveness if restored by December 31, 2020.
- Loan Maturity. For loans originated on or after June 5, 2020, the term is now five years. For loans originating before June 5, borrowers and lenders may mutually agree to extend 2-year loans.
- Deferral of Loan Payments. The earlier of 10 months after the last day of the Covered Period or when the SBA remits the loan forgiveness funds to the lender.
- New Safe Harbors Based on Employee Availability – Rehire/Hiring. FTE reductions would not reduce forgiveness if the borrower can document in good faith the inability to rehire individuals who were employees on February 15, 2020, or the inability to hire similarly qualified employees for unfilled positions by December 31, 2020.
- New Safe Harbors Based on Employee Availability – Compliance with HHS, CDC, or the OSHA. FTE reductions would not reduce forgiveness if the borrower can document in good-faith an inability to return to the same level of business activity as existed before February 15. This can be due to compliance with requirements established or guidance issued by the Secretary of Health and Human Services (HHS), the Director of the Centers for Disease Control and Prevention (CDC), or the Occupational Safety and Health Administration (OSHA) during the period beginning on March 1, 2020, and ending December 31, 2020, related to the maintenance of standards for sanitation, social distancing, or any other worker or customer safety requirement related to COVID–19.
- FICA Tax Deferral. Employers can defer payment of FICA from the period of March 27-December 31, 2020 – half to be paid in 2021; remainder due in 2022.
In addition, the Treasury also issued new borrower and lender forms to apply for PPP loans.
Our CARES Act Response Team will continue to keep you updated as future guidance is released. Please don’t hesitate to reach out with questions.
Three Steps to Loan Forgiveness
The PPP loan forgiveness process is likely to be time consuming and complicated, more so than the PPP application process itself. Calculations are complex and supporting documentation needs to be thorough and succinctly compiled. The Brown Smith Wallace CARES Act Loan Consulting team has customized services to fit your needs. Our full-service approach means you send us all the necessary information and we take care of the rest. Click here to get started.