New PPP Loan Forgiveness Guidance: What You Need to Know

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Last edited on July 2nd, 2020

On June 22nd, the SBA issued the new Interim Final Rule on the recently passed Paycheck Protection Program Flexibility Act (PPPFA). In summary, this new guidance provides clarity on the PPPFA and has opened up a lot of the options borrowers have in terms of how they use PPP loans, making it easier for most companies to receive full forgiveness. While this guidance has answered many questions people had about the PPPFA, it also poses new questions for borrowers. 

Here are some of the most frequently asked questions regarding the newly released PPP Loan Forgiveness guidance:

Can my business qualify for a second loan?

At this point, borrowers cannot apply for a second loan. If you haven’t yet applied for a PPP loan, there is still time. The deadline for PPP loan applications was June 30th; however, a five-week extension of this deadline has been approved by the Senate and the House, and signed by the President. With this extension, you now have until August 8th to get your loan application in. There’s about $130B left in PPP funds.

Can I apply for forgiveness before the end of the covered period? Can I choose to apply when my funds are up?

With the most recent round of guidance issued by the SBA, borrowers are now free to submit their forgiveness application once they have used all of their PPP funds. According to the law, you have up to 10 months from the end of the covered period to submit your forgiveness application. However, with covered periods now ranging from 8 to 24 weeks (or December 31st at the latest), many borrowers are opting to submit their forgiveness applications once they have used all of their PPP funds. To maximize forgiveness, borrowers should make sure that they have spent at least 60% of their PPP funds on payroll expenses, that they have not reduced wages or salaries more than 25%, and that they have maintained their workforce’s full-time equivalent headcount.

Will I receive full forgiveness if I use PPP loans to hire back only some of my previous employees?

Thanks to a fairly generous bit of recent guidance from SBA, borrowers who are unable to bring their staff’s numbers back up to a pre-pandemic level due to compliance with local, state, or federal COVID-19 related regulations or guidance are exempt from the FTE requirements of the CARES Act.

That is, if your business was ordered to shut down or operate on a much more limited capacity, you are not required to fully staff your business to the same levels prior to February 15, 2020. You will need to submit a copy of the applicable order or regulation that limited your business’ ability to operate and some financial documentation to demonstrate that your revenue has decreased since the same time last year.

What happens if I want to hire back all of my employees, but some reject the offer?

In order to take advantage of the FTE exemption as issued in the most recent round of guidance, borrowers have 30 days to report to their state unemployment agency any offers of work that were rejected. Employers must document the written offer of employment, the written rejection of said offer, and all efforts to hire similarly qualified employees (such as a job board post or a classified ad taken in your local newspaper).

What’s next? Regulations around the PPP will continue to evolve. As they do, we’ll be processing and summarizing these updates to share in our bi-weekly Legislative Updates, which you can register for here.

Comprehensive review of the full PPP Loan Forgiveness Application: Check out our recorded webinar from June 29th!

Still have questions? Bring your question to our next Legislative Update webinar, where we’ll be fielding questions on the air. Additionally, our COVID Resources page is updated daily with relevant forms and guidance.

 

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