SBA Revises Paycheck Protection Program Interim Final Rules

On July 6, 2020, the Small Business Administration (SBA) and Treasury Department released the detailed loan-level data regarding the Paycheck Protection Program (PPP). This disclosure includes the 4.9 million loans made since June 30, 2020.

The SBA and Department of Treasury announced on June 19 that additional data regarding the Paycheck Protection Program (PPP) loan recipients will be made public. To increase transparency and ensure funds are used appropriately, the SBA will release the business names, addresses, NAICS codes, zip codes, business types, demographic data, nonprofit information, jobs support, and loan amount ranges.

The loan amount ranges that will be shared are:

• $150,000-350,000
• $350,000-1 million
• $1-2 million
• $2-5 million
• $5-10 million

Loan amounts less than $150,000 will be released and aggregated by zip code, industry, business type, and various other demographics. The initial summary of PPP approved lending with demographic and lender information can be found here.

On June 16, 2020, the Small Business Administration (SBA) and Treasury released revisions to the third and sixth Interim Final Rules (IFR) for the Paycheck Protection Program (PPP).

The changes to the sixth IFR contained administrative language around eligibility requirements. The changes to the third IFR, however, provide guidance and examples for amounts eligible for forgiveness based on the 24 weeks. These changes affect maximum payroll costs per employee, owner compensation limits, and self-employed compensation limits.

Here, we’ve summarized the changes as well as other related updates concerning the PPP.

Additional clarification was given for determining the maximum payroll cost per employee. The maximum payroll cost per employee remains limited to $100,000 annualized for either the eight or 24 week period as appropriately allowed. This results in $15,385 if using eight weeks, and a maximum of $46,154 per employee if using the 24 week period.

Note the maximum for an owner/employee is limited to the equivalent of 2.5 months of payroll cost, not to exceed the $100,000 annual cost.

For self-employed persons filing a Schedule C or F, the maximum owner’s compensation replacement is limited per owner, across all businesses as follows:

A maximum of eight weeks’ worth of 2019 net profit, up to $15,385 or alternatively limited to 2.5 months’ worth of 2019 net profit, up to $20,833 for 24 weeks. This amount must exclude any qualified sick leave equivalent or qualified family leave equivalent claimed as a credit under Sec 7002 and 7004 of FFCRA.

This limitation was made to prevent a windfall to a self-employed person who obtained loan proceeds to cover an employee and subsequently laid off the employee due to circumstances that would have qualified for the safe harbor FTE count rule in the Flexibility Act.

Two new loan forgiveness applications designed to implement the provisions in the PPP Flexibility Act were released. The standard PPP loan forgiveness application and the EZ loan forgiveness application.

The EZ application can be used by borrowers in the following circumstances:

• Self-employed borrowers with no employees
• Employers who have not reduced salaries or wages by more than 25% and maintained FTE headcount
• Employers who have not reduced salaries or wages by more than 25% but due to reductions in business activity resulting from health directives related to COVID-19 were unable to maintain FTE headcount

On June 11, 2020, the SBA issued an IFR that allows telephone cooperatives that are exempt from Federal income tax to be eligible for PPP loan proceeds as long as they meet all the other eligibility requirements.

On June 15, 2020, SBA began accepting new Economic Injury and Disaster Loans (EIDL) and EIDL Advance applications from qualified small businesses and U.S. agricultural businesses. The SBA is still processing previously filed applications on a first-come, first-served basis.

The Main Street Lending Program is now open for lender registration. Once the program is operational, borrowers may apply for loans by contacting an eligible lender.

The entire Aldrich team is monitoring the PPPFA updates and guidance. We’ll be updating our COVID-19 Business Continuity Resource Center for a list of all PPP coverage. If you have any questions about the PPP loan forgiveness application, reach out to your Aldrich Advisor.

Please check back for future updates as additional guidance becomes available.

This article was written with the best available information as of July 8, 2020.