*The original article published on May 14, 2020 has been updated to reflect changes as of June 15, 2020.
Late in the evening on May 13, 2020 and again on May 20, 2020, the Small Business Administration (SBA) posted interim final rule supplements to the Paycheck Protection Program (PPP) under the CARES Act. The new guidance applies to companies that are eligible to ask for more PPP money because “some PPP loans were approved to partnerships or seasonal employers before the additional guidance was issued and, as a result, those businesses may not have received PPP loans in the maximum amount for which they are eligible.”
This interim final rule also authorizes all PPP lenders to increase existing PPP loans to partnerships or seasonal employers to include appropriate amounts to cover partner compensation in accordance with the interim final rule posted on April 14, 2020, or to permit the seasonal employer to calculate its maximum loan amount using the alternative criterion posted on April 28, 2020.
Additionally, these interim final rules delay the timeframe for lenders to report the loan on SBA Form 1502 to the later of (1) May 29, 2020, or (2) 10 calendar days after disbursement or cancellation of a PPP loan. Increases submitted outside of this date will not be forgiven and the lender will not earn a processing fee on such amounts.
Further, the SBA and Department of Treasury’s FAQ document, FAQ #47 and the interim final rule dated May 20, 2020, extended the safe harbor period (which was originally set to expire on May 7, then later extended to May 14). The safe harbor period now expires on May 18, 2020. This second extension is “to give borrowers an opportunity to review and consider FAQ #46,” which was issued earlier in the day on May 13, 2020. For additional information on FAQ #46’s guidance related to the good faith certification, see SBA Part Eleven.
Lastly, on May 18, 2020, the SBA posted additional interim final rule supplements to the PPP under the CARES Act providing a safe harbor for borrowers that may have applied before May 5, 2020 when clarification was provided based on SBA guidance in the SBA and Department of Treasury’s FAQ document. Such guidance provides that the SBA will not find any borrower that applied for a PPP loan prior to May 5, 2020 to be ineligible based on the borrower’s exclusion of non-U.S employees from the borrower’s calculation of its employee headcount if the borrower (together with its affiliates) had no more than 500 employees whose principal place of residence is in the U.S. Such borrowers shall not be deemed to have made an inaccurate certification of eligibility solely on that basis. Under no circumstances may PPP funds be used to support non-U.S. workers or operations.
For further information, please contact any member of Taft’s SBA Task Force.
Please visit our COVID-19 Toolkit for all of Taft’s updates on the coronavirus.