Paycheck Protection Program Loan Forgiveness Guidance Released
The US Small Business Association (SBA) and Treasury Department released new guidance on Paycheck Protection Program (PPP) loan forgiveness procedures for the application that was published earlier this month. The two interim final rules cover loan forgiveness requirements and the SBA’s loan review procedures for small businesses and lenders.
The loan forgiveness rule includes:
- An alternative method for determining when the eight-week period starts for businesses with pay cycles of biweekly or more frequent
- Eligible payroll costs include hazard pay and bonuses as well as salary, wages and commissions for furloughed employees as long as it doesn’t exceed an annual salary of $100,000, prorated for the covered period.
- Maximum amount of loan forgiveness for owner-employees and self-employed individuals’ own payroll compensation
- When non-payroll costs must be incurred or be paid to qualify for loan forgiveness
- Reductions in loan forgiveness amount based on reductions in full-time equivalent employees or in employee salary and wages during the covered period
- Clarification on a full-time equivalent employee
The loan review procedures rule includes:
- The SBA may review any PPP, regardless of size, to determine if the borrower is eligible for PPP loans under the CARES Act, whether the borrower calculated the loan amount correctly and used the funds for eligible costs, and whether the borrower is eligible for the amount of loan forgiveness it requests.
- A borrow can appeal the SBA’s determination through an appeals process that will be established soon.
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