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Paycheck Protection Program (PPP) Loan Update – May 5, 2020

Through May 5, 2020, the U.S. Small Business Administration provided an update to the PPP Frequently Asked Questions with the inclusion of Questions 40 – 43.

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Through May 5, 2020, the U.S. Small Business Administration provided an update to the PPP Frequently Asked Questions with the inclusion of Questions 40 – 43.

Through May 5, 2020, the U.S. Small Business Administration provided an update to the PPP Frequently Asked Questions with the inclusion of Questions 40 – 43. Some questions of note include:

Question 40:

Question: Will a borrower’s PPP loan forgiveness amount (pursuant to Section 1106 of the CARES Act and SBA’s implementing rules and guidance) be reduced if the borrower laid off an employee, offered to rehire the same employee, but the employee declined the offer?

Answer: No. As an exercise of the Administrator’s and the Secretary’s authority under Section 1106(d)(6) of the CARES Act to prescribe regulations granting de minimis exemptions from the Act’s limits on loan forgiveness, SBA and Treasury intend to issue an interim final rule excluding laid-off employees whom the borrower offered to rehire (for the same salary/wages and same number of hours) from the CARES Act’s loan forgiveness reduction calculation. The interim final rule will specify that, to qualify for this exception, the borrower must have made a good faith, written offer of rehire, and the employee’s rejection of that offer must be documented by the borrower. Employees and employers should be aware that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.

FAQ #40 will help maximize loan forgiveness for borrowers. It will be vital for borrowers to maintain all proper documentation.

Question 43:

Question: FAQ #31 reminded borrowers to review carefully the required certification on the Borrower Application Form that “[c]urrent economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” SBA guidance and regulations provide that any borrower who applied for a PPP loan prior to April 24, 2020 and repays the loan in full by May 7, 2020 will be deemed by SBA to have made the required certification in good faith. Is it possible for a borrower to obtain an extension of the May 7, 2020 repayment date?

Answer: SBA is extending the repayment date for this safe harbor to May 14, 2020. Borrowers do not need to apply for this extension. This extension will be promptly implemented through a revision to the SBA’s interim final rule providing the safe harbor. SBA intends to provide additional guidance on how it will review the certification prior to May 14, 2020.

In addition to the extension, it appears that SBA will define ‘current economic uncertainty which makes the PPP loan request necessary to support the ongoing operations.’ Hopefully, this guidance will be issued in the coming days so borrowers can gather the necessary documentation (requested by the SBA) to support their need. Regardless of the pending guidance, borrowers should be prepared to support their need of a PPP Loan with documentation.

If you have any questions on what would satisfy the ‘current economic uncertainty which makes the loan request necessary to support the ongoing operations’ requirement, pending issuance of the forthcoming guidance, please consult with your legal counsel.

Interim Final Rule on Nondiscrimination and Additional Eligibility Criteria

On May 5, 2020, the U.S. Small Business Administration issued Interim Final Rule on Nondiscrimination and Additional Eligibility Criteria.  This guidance covers the following areas:

  1. Nondiscrimination
  2. Student Workers and PPP Loan Eligibility

COVID-19 Business Resources

Disclaimer:  The contents of this resource are for general informational purposes only. While every effort has been made to ensure its accuracy, the information is provided “as is” and no representations are made that the content is error-free. We have no obligation to update any content, comments or other information for retroactive or prospective interpretations or guidance provided by regulators, financial institutions or others. The information is not intended to constitute legal advice or replace the advice of a qualified professional. There are areas of the CARES Act where additional clarification from the Treasury Department and the SBA is needed. Your judgment and interpretation of the act may be needed. Users should consult with their legal counsel and representatives of the lending institution regarding the proper completion of their application and supporting documentation.

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