Late last night, the Small Business Administration (SBA) issued the
First Interim Rule
regarding revisions to the Paycheck Protection Program (PPP) following the passage of the Paycheck Protection Program Flexibility Act. The interim rule provides initial guidance to borrowers on the program’s changes under the new law.
Notably, the interim rule clarifies that small businesses can qualify for partial loan forgiveness even if 60% of the PPP loan wasn't directed toward loan forgiveness. Instead, 60% of the amount eventually forgiven should go toward payroll.
SBA provided the following example to illustrate this clarification:
"If a borrower receives a $100,000 PPP loan, and during the covered period the borrower spends $54,000 (or 54 percent) of its loan on payroll costs, then because the borrower used less than 60 percent of its loan on payroll costs, the maximum amount of loan forgiveness the borrower may receive is $90,000."
Below is a summary of the additional provisions passed by Congress that were included in the interim rule:
- Extends the covered period for loan forgiveness from eight weeks after the date of loan disbursement to 24 weeks after the date of loan disbursement. Borrowers who have already received PPP loans retain the option to use an eight-week covered period;
- Provides a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees for borrowers that are unable to return to the same level of business activity the business was operating at before February 15, 2020, due to compliance with requirements or guidance issued between March 1, 2020 and December 31, 2020 by the Secretary of Health and Human Services, the Director of the Centers for Disease Control and Prevention, or the Occupational Safety and Health Administration, related to worker or customer safety requirements related to COVID–19;
- Provides a safe harbor from reductions in loan forgiveness based on reductions in full-time equivalent employees, to provide protections for borrowers that are both unable to rehire individuals who were employees of the borrower on February 15, 2020, and unable to hire similarly qualified employees for unfilled positions by December 31, 2020;
- Increases to five years the maturity of PPP loans that are approved by SBA (based on the date SBA assigns a loan number) on or after June 5, 2020;
- Extends the deferral period for borrower payments of principal, interest, and fees on PPP loans to the date that SBA remits the borrower’s loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period);
- Confirms that June 30, 2020 remains the last date on which a PPP loan application can be approved.
NLBMDA will continue to provide members with further guidance as it becomes available. For questions, please contact Kevin McKenney at