SBA Issues Guidance on Loan Forgiveness Under the Paycheck Protection Program

May 22, 2020

On May 22, 2020, the U.S. Small Business Administration (“SBA”) and the U.S. Department of Treasury issued the long-awaited guidance on the loan forgiveness requirements of the Paycheck Protection Program. See PPP Interim Final Rule - Requirements - Loan Forgiveness (“Guidance”). The guidance was issued on the heels of the SBA’s release of the Paycheck Protection Program Loan Forgiveness Application. See Paycheck Protection Program Loan Forgiveness Application (“Application”). Among the many issues addressed by the Guidance and Application include:

  • Guidance regarding reductions to forgiveness where full-time headcount declines and/or if salaries and wages decrease;
  • Options for borrowers to calculate payroll costs using an “alternative payroll covered period” that aligns with borrowers’ regular payroll cycles;
  • Flexibility to include eligible payroll and non-payroll expenses paid or incurred during the eight-week period after receiving their PPP loan;
  • Step-by-step instructions on how to perform the calculations required by the CARES Act to confirm eligibility for loan forgiveness; 
  • Borrower-friendly implementation of statutory exemptions from loan forgiveness reduction based on rehiring by June 30; and
  • Addition of a new exemption from the loan forgiveness reduction for borrowers who have made a good-faith, written offer to rehire workers that was declined. 

Although the Guidance and Application answer many of the looming questions surrounding the loan forgiveness requirements of the Paycheck Protection Program, numerous questions remain. It is anticipated that many of such unanswered questions will be resolved through the issuance of additional guidance, through revisions to the Interim Final Rule on Loan Forgiveness, through additional Frequently Asked Questions (“FAQ”) issued by the SBA in consultation with the U.S. Department of Treasury, or otherwise. See FAQ for Lenders and Borrowers. Businesses participating in the Paycheck Protection Program would be well advised to keep abreast of any updates to the Guidance, Application, and FAQs as it relates to loan forgiveness.