The U.S. Treasury and Small Business Administration issued an interim final rule governing the Paycheck Protection Program June 11.

The new interim final rule followed Congress enacting the PPP Flexibility Act revises the former rules by changing key provisions, such as the loan maturity, deferral of loan payments and forgiveness provisions. 

The new interim final rule followed Congress enacting the PPP Flexibility act, which provides more flexibility for small businesses.

The rule provisions related to loan forgiveness and deferral periods are effective Mar. 27, 2020 and apply to all loans.

The provisions related to loan maturity apply only to loans made on or after June 5, 2020. 

Rules

The new rules: 

  • Expand the period during which PPP loan proceeds must be used from eight weeks to 24 weeks (but not later than Dec. 31, 2020). However, existing PPP borrowers may choose to continue using the original eight-week period.
  • Provide additional flexibility by decreasing the amount that must be used on payroll costs to 60% from 75%, allowing up to 40% to be used for non-payroll costs
  • Extend the time to rehire or restore pay reductions (exceeding 25%) from June 30, 2020, to Dec. 31, 2020
  • Expand opportunities for loan forgiveness due to layoffs or furloughs where borrowers are unable to recover to pre-COVID full time equivalent employee levels. 
  • Allow borrowers five years to repay the unforgiven portion of the PPP loan for loans approved by the SBA on or after June 5, 2020. For loans made before June 5, the maturity date is two years, however, lenders and borrowers can mutually agree that existing PPP loans (made before June 5, 2020) have at least five years (instead of two years) to repay the loan. The date for determining when a loan is made is the date SBA assigned a loan number to the PPP loan.
  • Extend the deferral period for loan principal, interest, and fees, until the date that the loan forgiveness amount is remitted by the SBA to the lender, or 10 months after the end of the 24 week period if you fail to apply for loan forgiveness. 
  • Allow businesses that receive PPP loan forgiveness to defer all 2020 Social Security taxes until 2021 and 2022.

Loans Available

As many of the first borrowers in the PPP program are nearing the end of their eight-week covered period, the new rules do not preclude those borrowers from applying for loan forgiveness. 

The new rules will apply to all future loans.

There is still approximately $120 billion in PPP funds available. The deadline to apply for a PPP loan is June 30, 2020.

In addition to modifying the rules and guidance to implement the act, the borrower application form and loan forgiveness application will be modified.


 For more information, contact CBIA's Brian Corvo (860.244.1169).