On Monday, June 8, the Small Business Administration (SBA), in conjunction with the Treasury, issued a statement that clarified an aspect of last week's new PPP legislation that created some confusion.
The Paycheck Protection Flexibility Act, a bill designed to loosen the restrictions for PPP loan forgiveness that was signed into law last week, decreased the percentage PPP recipients must spend on payroll-related costs to qualify for loan forgiveness from 75 percent to 60 percent. However, the legislation insinuated that no forgiveness will be granted unless at least 60 percent is spent on payroll, which made this provision appear to be a cliff threshold.
Monday's statement from the SBA clarified this provision, saying that partial loan forgiveness will still be available under the 60 percent threshold. Specifically, the statement noted that, "[i]f a borrower uses less than 60 percent of the loan amount for payroll costs during the forgiveness covered period, the borrower will continue to be eligible for partial loan forgiveness, subject to at least 60 percent of the loan forgiveness amount having been used for payroll costs."
Monday's statement also indicated that the SBA intends to "promptly" issue additional rules and guidance, a modified loan forgiveness application form that implements the amendments made to the PPP as a result of the new law, and a modified borrower application form.
We will continue to update you as more information becomes available, and we plan to conduct a webinar to explain these recent developments in more detail after the SBA issues its additional guidance and updated loan forgiveness application.
If you have any questions about these or any other matters, please contact your Kreischer Miller relationship professional or any member of our team. We also continue to update our COVID-19 Resource Center, which you can access here.
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