Paycheck Protection Program (PPP) loan requirements continue to evolve as the Small Business Administration (SBA) releases new guidance rapidly in response to borrowers’ demands for clarifications. The result has been significant policy changes during the six weeks since the loan program began accepting applications.
The SBA’s recent guidance has covered a variety of topics, which include clarifying affiliate rules for eligibility, calling for mandatory audits of borrowers with a loan size greater than $2 million, creating an option for partnerships and seasonal employers to increase original loan amounts to include additional compensation, and creating safe harbors for certain borrowers. The IRS has also weighed in with guidance that limits eligible deductions for expenses paid by loan proceeds that are forgiven. Current guidance can be found on the SBA’s website.
While many uncertainties remain due to the minimal and sometimes contradictory guidance, the SBA has now released the Loan Forgiveness Application and Instructions which gives borrowers their first look at what will be required to apply for loan forgiveness at the end of the covered period. Among other changes, the instructions include an alternative payroll covered period that offers borrowers flexibility to delay the start of their covered period to the date of the first payroll period after disbursement and to include wages incurred but not paid during the covered period, subject to some exceptions.
Additional guidance is needed and expected, which means borrowers should anticipate the rules may change prior to loan forgiveness applications being approved. Lawmakers are expected to propose legislation to lessen some of the disadvantages borrowers have discovered with the PPP, and current proposals include extending the covered period by 10-12 weeks and loosening the requirement that 75% of funds be used on payroll costs.
ELPO Law will continue to monitor issues related to PPP loans. Please contact us at 270-781-6500 with any questions.