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SBA and Treasury Issue Guidance on PPP Loan Review Procedures and Loan Forgiveness Requirements

Late last Friday, the U.S. Small Business Administration (SBA) and Treasury Department (Treasury) issued two new interim final rules regarding the Paycheck Protection Program (PPP).

The first rule specifically addresses and clarifies several issues regarding loan forgiveness and, among other provisions: (1) clarifies that bonuses and hazard pay are eligible for loan forgiveness, as are salary, wages, and commission payments to furloughed employees subject to an annual salary cap of $100,000; (2) clarifies non-payroll costs that may be forgiven to include both real property and also personal property, like leases or vehicles and equipment; (3) establishes caps on the amount of loan forgiveness available for owner-employees and self-employed individuals’ own payroll compensation; (4) reiterates that in calculating any reduction in full time equivalent employees, employers can exclude any employees who decline a good faith offer to return at the same pay and hours; and (5) explains how borrowers can restore forgiveness if they rehire employees by June 30, 2020 and reverse reductions to salaries and wages for full time equivalent employees. 

The second rule outlines PPP loan review procedures and related lender and borrower responsibilities. In particular, this rule contains provisions: (1) establishing that the SBA may review PPP eligibility, use of the funds, the amount of the loan, and forgiveness of the loans for up to six years after forgiveness or repayment in full; (2) providing that borrowers may appeal SBA determinations within 30 days of receipt (subject to an appeals process that will be outlined in a future interim final rule); and (3) requiring lenders to make a determination regarding PPP loan forgiveness within 60 days of receiving a loan forgiveness application from a borrower (subject to a separate 90-day window for SBA review of the application.)  

Both rules will be effective upon publication in the Federal Register and will be subject to 30-day comment deadlines.

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