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June 10 guidance clarifies key provisions of the PPP Flexiblity Act. In light of increased flexibility, organizations who have not yet applied for a PPP loan may wish to reconsider. Act fast, the deadline to obtain an SBA loan number is June 30, 2020.

Regulations

SBA Releases First Conforming Guidance for PPP Flexibility Act

  • Jack Rybicki
  • Christine Hall
  • 6/16/2020

Update:
This article was originally published on June 11, 2020. It was updated on June 16, 2020 to emphasize the June 30, 2020 deadline for lenders to obtain an SBA loan number for a PPP loan.

Key insights

  • The Paycheck Protection Program Flexibility Act was signed into law by the President on June 5, 2020.
  • Guidance issued by the SBA on June 10 clarified key provisions of the PPP Flexibility Act that were ambiguous.
  • As of June 12, 2020, $129 billion in PPP funds remain available.
  • The SBA and Treasury have stated that guidance in the form of a new loan application, new loan forgiveness applications, new IFRs, and new FAQs will be forthcoming.
  • You may want to consider waiting to submit your forgiveness package.

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On June 10, the U.S. Small Business Administration (SBA) issued an Interim Final Rule (IFR) entitled “Revisions to First Interim Final Rule,” to implement certain changes that the Paycheck Protection Program (PPP) Flexibility Act makes to previously issued IFRs.

This IFR followed the signing of the PPP Flexibility Act by the President on June 5.

In addition to memorializing components of the PPP Flexibility Act, such as the extension of the loan forgiveness period to 24 weeks and the extension of the maturity date for new loans under the PPP to five years, major clarifications made by the SBA include:

  1. The requirement that 60% of loan proceeds be used for payroll costs will be interpreted “as a proportional limit on nonpayroll costs as a share of the borrower’s loan forgiveness amount rather than as a threshold for receiving any loan forgiveness.” In other words, forgiveness will be reduced (but not eliminated) if less than 60% of the loan was used to pay payroll costs.
  2. If a borrower submits a loan forgiveness application within ten months after the end of the covered period, no payments of principal or interest will be due until the SBA remits the loan forgiveness amount to the lender. If a borrower does not submit a loan forgives application within ten months after the end of the covered period, the borrower must begin paying principal and interest on or after the last day of the ten-month period. This extension of the deferral period for PPP loans beyond the six-month period contained in the CARES Act is retroactive to March 27, 2020, and applies to all loans under the PPP.
  3. The last day a lender can obtain an SBA loan number for a PPP loan is June 30, 2020.

PPP funds still available

Now is the time to reassess your needs if you haven’t yet applied for PPP funds. Given the increased flexibility to receive forgiveness, you may find a PPP loan makes sense for your organization. Many lenders are opening up their portals to accept PPP applications again. If you choose to apply for a PPP loan, submit your application to your lender quickly so that the loan request can be submitted to the SBA prior to the June 30 deadline.

How we can help

We are here to help interpret the ever-changing guidance, assist with the PPP loan application and documentation, and make the most of benefits allowed under the program while providing guidance to help you understand the risk landscape.

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  • Christine Hall
  • BizOps Chief Financial Officer