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U.S. Treasury and SBA Issue New Updates for PPP Loans

Wednesday, June 24, 2020   (0 Comments)
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There are yet more changes to the Paycheck Protection Program loan forgiveness process.

They revised the Loan Forgiveness Application for a third time since the origination of the program on June 24, 2020.

Click here for a copy of the new form.

They issued new Interim Final rules to clarify some of the issues surrounding the PPP Flexibility Act.

We are thankful to Kyle Kring and Kerri Polizzi of member attorney firm Kring & Chung, for their overview of the new Interim Final Rules. That overview follows below.

The SBA/Treasury Dept. have published a new Interim Final Rule on Revisions to Loan Forgiveness Interim Final Rule and SBA Loan Review Procedures Interim Final Rule (hereinafter "IFR"). It can be accessed by clicking here.

The relevant content begins at the bottom of page 6 (everything before that is a procedure history/background). The IFR largely contains the same information previously available but in an updated format. However, the following clarifications may be of interest:

  • "A borrower may submit a loan forgiveness application any time on or before the maturity date of the loan - including before the end of the covered period - if the borrower has used all of the loan proceeds for which the borrower is requesting forgiveness. If the borrower applies for forgiveness before the end of the covered period and has reduced any employee's salaries or wages in excess of 25 percent, the borrower must account for the excess salary reduction for the full 8-week or 24-week covered period." This is consistent with our prior guidance.
  • "A nonpayroll cost is eligible for forgiveness if it was:
    • paid during the covered period; or
    • incurred during the covered period and paid on or before the next regular billing date, even if the billing date is after the covered period."
  • Documents that should be maintained for the exemption from FTE reductions in loan forgiveness based on good faith attempts to rehire employee or hire similarly qualified individuals "include, but are not limited to, the written offer to rehire an individual, a written record of the offer's rejection, and a written record of efforts to hire a similarly qualified individual."
  • Documents that should be maintained for the exemption from FTE reductions based on a good faith inability to return to the same level of business activity due to COVID-related restrictions "must include copies of applicable COVID Requirements or Guidance for each business location and relevant borrower financial records."
  • "The Administrator, in consultation with the Secretary, is interpreting the [COVID Requirements or Guidance] exemption to include both direct and indirect compliance with COVID Requirements or Guidance, because a significant amount of the reduction in business activity stemming from COVID Requirements or Guidance is the result of state and local government shutdown orders that are based in part on guidance from the three federal agencies." The following example is provided: "Example: A PPP borrower is in the business of selling beauty products both online and at its physical store. During the covered period, the local government where the borrower's store is located orders all non-essential businesses, including the borrower's business, to shut down their stores, based in part on COVID-19 guidance issued by the CDC in March 2020. Because the borrower's business activity during the covered period was reduced compared to its activity before February 15, 2020 due to compliance with COVID Requirements or Guidance, the borrower satisfies the Flexibility Act's exemption and will not have its forgiveness amount reduced because of a reduction in FTEs during the covered period, if the borrower in good faith maintains records regarding the reduction in business activity and the local government's shutdown orders that reference a COVID Requirement or Guidance as described above."

 

 

Kyle D. Kring
Kring & Chung, llp
38 Corporate Park
Irvine, CA 92606
Telephone: (949) 261-7700
Facsimile: (949) 261-8800
kkring@kringandchung.com
http://www.kringandchung.com


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