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SBA Issues Interim Final Rule Implementing PPP Flexibility Act Changes

The U.S. Small Business Administration (SBA) has published a new interim final rule regarding the Paycheck Protection Program (PPP) in response to the Paycheck Protection Program Flexibility Act of 2020 (Flexibility Act), which amended the Coronavirus Aid, Relief, and Economic Security (CARES) Act and was signed into law on June 5, 2020. Specifically, this new rule implements Flexibility Act changes to PPP regulations that the SBA previously published on April 20, 2020 and May 4, 2020.

This new interim final rule reflects the fact that the Flexibility Act: (1) reduces from 75 percent to 60 percent the portion of PPP loan proceeds that must be used for payroll costs; (2) extends the end date of the “covered period” governing PPP loan use, loan eligibility, and related requirements from June 30, 2020 to December 31, 2020; (3) provides a five-year maturity for loans made on or after June 5, 2020 and provides an option for loans made prior to that date to extend maturity from two years to five years at the mutual agreement of the borrower and lender; (4) extends the loan forgiveness period from eight weeks to 24 weeks, noting that borrowers may opt to keep the forgiveness period at eight weeks for loans made prior to June 5, 2020; and (5) clarifies that the amount of loan forgiveness will depend, in part, on the total amount spent on payroll costs (including salary, wages, and tips, up to $100,000 annualized pay per employee), benefits for employees, owner compensation replacement, payments of interest on mortgage obligations on real or personal property incurred before February 15, 2020, rent payments on lease agreements in force before February 15, 2020, and utility payments under service agreements dated before February 15, 2020.

The provisions in this interim final rule related to loan forgiveness for PPP loans are retroactively effective March 27, 2020 – the date that the CARES Act was enacted. The provision in this interim final rule relating to the maturity date of PPP loans is effective June 5, 2020 – the date that the Flexibility Act was enacted. All other provisions are effective June 16, 2020.

Comments on the rule are due by July 20, 2020 and can be submitted via the federal eRulemaking portal using Docket ID SBA-2020-0037.


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