SBA Releases Important New Rules Regarding PPP Loan Surrender | Fisher phillips


The Small Business Administration (SBA) has just released important new rules regarding the forgiveness of Paycheck Protection Program (PPP) loans. The June 22 revisions to the Interim Final Rule on Loan Forgiveness and the Interim Final Rule of the SBA Loan Review Procedures provide further clarification on the rules governing the forgiveness of PPP loans, while providing borrowers with a additional flexibility. What should employers know about these developments?

If we have used all of the PPP loan proceeds before the end of the covered period, can we request a discount before the end of the covered period?

Yes. The new rules specify that a borrower can submit a loan forgiveness request before the end of the period covered if they have used all of the loan proceeds for which they are requesting a forgiveness.

Many borrowers who were nearing the end of their eight-week coverage period when the PPP Flexibility Law was passed had not spent all of their PPP funds, but also did not have enough funds to cover the costs. wages for the extended 24-week period. This left many borrowers wondering whether to stick with the eight week period and return the unused funds, or use the new 24 week covered period and potentially have many weeks not covered by the PPP loan funds.

The new rules allow borrowers to choose the 24-week covered period without requiring the borrower to wait until the end of the 24-week covered period to request a loan forgiveness. As a result, employers have more flexibility with their staffing needs. They can choose to use the 24 week period covered without having to consider how downsizing after the PPP funds are exhausted would impact the remission – provided, of course, that they submit their request. delivery immediately after depletion of PPP loan funds.

Borrowers should note that the rules state that if the borrower requests a discount before the end of the period covered and “has reduced an employee’s wages or salaries by more than 25%, the borrower should take into account the reduction in excess wages for the whole of the eight days. week or 24 week period covered. However, if the borrower has reinstated wages and salaries at the time of submitting the forgiveness request, the borrower does not need to account for the reduction in wages / salary.

If my business is unable to return to the same level of business activity as before February 15, 2020 due to compliance with a state order related to COVID-19, does that address loan forgiveness reduction exemption?

The new rules specify that a reduction in business activity following a state or local shutdown order is sufficient to take advantage of the loan forgiveness exemption.

The PPP Flexibility Law created a new exemption from the reduction in loan forgiveness based on the reduction in FTE staff during the period covered. To meet this exemption, a borrower must be able to document in good faith “an inability to return to the same level of business activity as that at which the borrower was operating prior to February 15, 2020, due to compliance with established requirements or guidelines issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Social Services, the Director of the Centers for Disease Control and Prevention (CDC) or the Occupational Safety and Health Administration concerning the maintenance of sanitation standards , social distancing, or any other worker or customer safety requirements related to COVID-19. “

Many borrowers have closed their businesses or seen their operational capacity limited due to state or local health ordinances, and not directly due to guidelines issued by federal agencies. The new rules clarify that the legal exemption includes “both direct and indirect compliance” with COVID-19 requirements or guidelines issued by federal agencies. The rules recognize that “a significant amount of the reduction in business activity resulting from COVID requirements or guidelines is the result of state and local government shutdown orders that are based in part on guidelines from the three federal agencies “.

The new rules also specify that borrowers who wish to benefit from the new exemption must keep copies of any applicable COVID-19 guidelines or closure orders that have resulted in the reduction in business activity and the borrower’s relevant financial records attesting to the reduction. This documentation must be kept for six years.

Are there any limits on the amount of loan forgiveness available for owner-employee compensation?

Yes. The new rules clarify that for borrowers opting for an eight week covered period, the amount of loan forgiveness requested for owner-employer compensation is capped at eight weeks (8/52) of their 2019 compensation. , or $ 15,385 per owner. -employee, whichever is less. For borrowers with a 24-week covered period, the cap is 2.5 months (2.5 / 12) of owner-employee compensation in 2019 or $ 20,833 per owner-employee, whichever is less. raised. This restriction is entirely a creation of the rules, for nothing in the Act itself suggests such a restriction.


The new rules give borrowers flexibility in deciding whether to adopt the new 24-week coverage period or to maintain the original eight-week coverage period. This is good news for borrowers who could use up their PPP loan funds soon after the expiration of the eight week covered period, as they will now be able to switch to the 24 week covered period and not wait until the end of the period. the entire 24 week period. period of one week to request a loan forgiveness. The new rules also extend the new safe harbor provision for businesses unable to return to the same level of business activity as before when state and local orders are the cause of downsizing.


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