On Aug. 10, 2020 the Small Business Administration (SBA) Paycheck Protection Program (PPP) Forgiveness Platform went live. This platform allows lenders to interface with the SBA to upload required data and documentation, review status of requests, and obtain information on additional information required by the SBA or notification of an SBA loan review selection.
Borrowers that elected an eight-week covered forgiveness period have reached the end of the forgiveness window and may be looking to obtain loan forgiveness at the first available opportunity due to continued economic uncertainty. Certain borrowers that elected the 24-week covered for loan forgiveness may also have exhausted their funding and be eligible to apply for forgiveness prior to the end of the 24-week period. Other borrowers may be near exhausting their funds, but wish to wait on their loan forgiveness applications until other borrowers have tested the review process. Regardless of when they plan to file, all borrowers should review the Loan Forgiveness Application Instructions and ensure all required information is provided to the lender to expedite the loan forgiveness process.
On August 4, and updated August 11 to address the interaction of the Economic Injury Disaster Loan (EIDL) advance interaction with the PPP, the SBA released a PPP Loan Forgiveness Frequently Asked Questions (FAQ) document. This document provides additional information on timing of paid or incurred payroll costs eligible for forgiveness as well as providing that, similar to the loan application, the gross amount should be used to calculate cash compensation eligible for loan forgiveness. The FAQ also addresses in more detail the determination of owner-employee compensation and gives additional guidance on health care benefits and retirement plan contributions eligible for loan forgiveness.
The SBA also addresses non-payroll costs and FTE reductions in the loan forgiveness FAQ. While some of the FAQ reiterates previously released items, the FAQ addresses interest on unsecured credit (not eligible), interest on renewed or refinanced leases or mortgage loans for which the original lease or mortgage existed prior to Feb. 15, 2020 (eligible), and eligible transportation and utility payments.
Also provided is additional detail on the loan forgiveness reduction provisions contained within the CARES Act or PPP Flexibility Act. The FAQ provides borrowers additional information on how to determine the FTE reductions for seasonal employers as well as examples of the interaction between the FTE reduction and the salary/hourly wage reduction.
Finally, with respect to EIDL advances and PPP loans, the SBA will deduct the advance from the loan forgiveness amount as the lender does not know whether a PPP borrower received an EIDL advance until the SBA deducts and uploads supporting information to the loan forgiveness platform. Borrowers that received EIDL advances in excess of their PPP loans, will receive no loan forgiveness and the lender will provide the first payment due date of their PPP loans.
In other guidance released August 11, the SBA further clarified the group health benefit item in its Paycheck Protection Program Frequently Asked Questions that these eligible payments include vision and dental benefits. Also released was an Interim Final Rule of Appeals of SBA Loan Review Decisions Under the PPP. This interim final rule (IFR) establishes the process for appealing certain SBA loan review decisions under the PPP.
Borrowers should be aware of the SBA’s ability to undertake a loan review at any time for a PPP loan of any size, but the specific practice rules contained within this IFR are for loan review decisions made by SBA after it completes a review of the loan through the normal loan review process (i.e., lender determination of loan forgiveness amounts). Examples of appealable decisions include a final SBA loan review decision that finds a borrower –
- Was ineligible for a PPP loan;
- Was ineligible for a PPP loan amount received or used the PPP loan proceeds for unauthorized uses;
- Is ineligible for PPP loan forgiveness in the amount determined by the lender in its full approval or partial approval decision issued to SBA (except for the deduction of any Economic Injury Disaster Loan advance in accordance with section 1110(e)(6) of the CARES Act); and/or
- Is ineligible for PPP loan forgiveness in any amount when the lender has issued a full denial decision to SBA.
Borrowers can request an SBA review of a lender decision to deny loan forgiveness, but the recently released IFR only addresses appeals through the SBA Office of Hearings and Appeals. Borrowers should also be aware that an appeal by a PPP borrower does not extend the deferral period of the PPP loan.