SBA Issues Additional Guidance Regarding PPP Loan Forgiveness and PPP Loan Review Process

May 26, 2020
Firm Publication

The Small Business Administration (SBA) issued two interim final rules on May 22 providing, respectively, additional clarifications regarding Paycheck Protection Program (PPP) loan forgiveness (the Forgiveness Rule) and information about the SBA’s process for reviewing PPP loans for compliance with program requirements and related borrower and lender responsibilities (the Loan Review Rule).

Forgiveness Rule

The Forgiveness Rule formalizes much of the guidance contained in the instructions to the PPP loan forgiveness application released on May 15. The Forgiveness Rule also confirms that pay to furloughed employees, bonuses, and hazard pay are eligible for forgiveness (subject to the per-employee cap on forgiveness-eligible cash compensation of $15,385) and provides additional detail regarding the statutory reductions to the forgiveness amount based on decreases in employee compensation and total number of full time equivalent employees.

Loan Review Rule

The Loan Review Rule outlines the PPP loan forgiveness and review processes. Borrowers should note that, between lender and SBA review periods, a borrower may not receive confirmation that its forgiveness application has been approved for up to 150 days after submission, by which time the borrower would have been required to begin making payments on the PPP loan. Accordingly, borrowers should consider submitting their PPP loan forgiveness applications as promptly as practicable following the expiration of the Covered Period.

The Loan Review Rule also details the obligations of lenders in processing applications for PPP loan forgiveness, including that “[l]enders are expected to perform a good-faith review, in a reasonable time, of the borrower’s calculations and supporting documents concerning amounts eligible for loan forgiveness.”

For an overview of the SBA’s PPP forgiveness guidance, see our prior alert, which has been updated.

The Bass, Berry & Sims CARES Act Task Force has been closely monitoring developments related to the unprecedented governmental assistance programs enacted in response to the COVID-19 pandemic. If you have questions about the PPP and your business, please contact the authors or your relationship attorney at the firm.