SBA Issues Interim Final Rule on
Paycheck Protection Program
In our June 5
Agent Alert, we reviewed the Paycheck Protection Program Flexibility Act of 2020 and the changes that it made to the paycheck protection program (PPP). The Small Business Administration has now issued an
interim final rule
in order to accommodate these changes to the program.
In the interim final rule, the SBA notes that the recent act changed key provisions of the program, including those that govern the maturity of PPP loans, the deferral of loan payments, and the forgiveness of these loans.
As to loan forgiveness, the SBA rule sets forth information concerning forgiveness of a PPP loan that is used for payroll costs. The example in the rule states that a borrower must use at least 60% of the loan for such costs in order to receive
full loan forgiveness, but if a borrower uses less than 60% of the loan for these costs, then the borrower may receive
partial loan forgiveness.
The rule also states that if a borrower submits a loan forgiveness application within ten months after the end of the loan forgiveness period, the borrower will not have to make any payments of principal or interest on the loan before the date on which the SBA remits the loan forgiveness amount to the lender or notifies the lender that no loan forgiveness is allowed.
The SBA states that the rule is effective without the usual advance notice and comment period, given its authority under the CARES Act to issue implementing regulations without regard to notice requirements. The SBA also states that advance notice and comment would defeat the purpose of the rule, especially given that the SBA’s authority to guarantee PPP loans expires on June 30, 2020. Although the rule goes into effect immediately, comments from the public will be accepted, and the SBA will consider any such comments in determining whether any changes to the rule are warranted.