June 16, 2020
By Caity Witucki
Contributing Editor, Hot Topic Tuesday
Hot Topic Tuesday — SBA and Treasury Announce Revised Guidance Regarding PPP
Last Friday, The U.S. Small Business Administration, in consultation with the U.S. Department of the Treasury, issued new and revised guidance for the Paycheck Protection Program (PPP). This guidance implements the Paycheck Protection Program Flexibility Act (PPPFA), signed into law by President Trump on June 5, 2020, and expands eligibility for businesses with owners who have past felony convictions.
To implement the PPPFA, SBA revised its first PPP interim final rule, which was posted on April 2, 2020. The new rule updates provisions relating to loan maturity, deferral of loan payments, and forgiveness provisions. Specifically, it makes the following changes:
- Lowers the requirements that 75% of a borrower’s loan proceeds must be used for payroll costs to 60%.
- Extends from 8 to 24 weeks the amount of time borrowers have to spend their loan funds.
- Provides a safe harbor based on reductions in full-time equivalent employees for borrowers that are unable to return to the same level of business activity.
- Increases PPP maturity to five years.
In addition to the changes pursuant to the PPPFA, the eligibility threshold for those with felony criminal histories has been changed to support criminal justice reform. The look-back period has been reduced from 5 years to 1 year to determine eligibility for applicants who have been convicted, pleaded guilty, pleaded nolo contendere, or been placed on any form of parole or probation. However, the period remains 5 years for felonies including fraud, bribery, and embezzlement. The application also eliminates pretrial diversion status as a criterion affecting eligibility.
SBA issued revised PPP application forms to conform to these changes. The guidance and revised application forms are available on SBA’s and Treasury’s websites. SBA announced in a June 12 press release that the Administration will issue additional guidance regarding loan forgiveness in the near future.