About PPP Loans
The Treasury Department and SBA released new PPP guidance regarding the Paycheck Protection Program. The new guidelines address loan forgiveness and procedures that borrowers and lenders must use during the review process. Those who received the earliest PPP loans will need to apply for loan forgiveness soon.
Loan Forgiveness Guidance
The new guidelines will confirm forgiveness eligibility and only a portion of the loan is forgiven. If forgiveness of the loan is denied, the remaining balance must be repaid on or before two years since the end of the loan.
Covered Under Loan Forgiveness
There are only certain costs that are covered under loan forgiveness from PPP loans.
- Payroll costs must make up 75% of the amount for which a borrower seeks loan forgiveness
- The loan could begin on the first day of the payroll cycle
- Confirms that payroll costs start on the day the employee’s pay is earned
- Employee bonuses and hazard pay are eligible for payroll costs under $100,000 annually
- Furloughed wages can be recovered
- Owner-employees and self-employed individuals have limited payroll compensation of no greater than the lesser of 8/52 of 2019 compensation or $15,385 per individual,
- 25% of eligible non payroll costs (Advanced interest on mortgages is not covered)
- EIDL advances will be deducted from loan forgiveness amounts
- Voluntary resignations and schedule reductions or for-cause terminations will not be penalized
- No penalization for rehiring an employee
Under the new guidelines, lenders have 60 days from receipt of a complete forgiveness application to issue a decision to the SBA. The lender needs to request payment from the SBA at the time it issues a decision to the organization. Then, the SBA has 90 days to remit appropriate forgiveness to the lender plus accrued interest.
Loan Review Rules
Even though lenders review loans for SBA, the agency issued guidelines for the process. This includes the SBA reviewing any PPP loans at any time in its discretion. This includes laons smaller than $2M. Borrowers can appeal decsions to the SBA.
Rules for Lenders
Regulators need to keep all records and confirm receipts of documentation to verify payroll and nonpayroll costs. This includes loan forgiveness calculations. A lender should submit the decision of approval to the SBA. This includes a reason for denial. If there is a denial, the borrower can request a SBA review within 90 days.
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