Insights

MPL General Counsel Corner – PPP guidance is like the weather, if you don’t like it, wait five minutes.

May 27, 2020

During this time of year, if you don’t like weather, wait five minutes.  Well, I feel the same way about PPP and other relief programs.  Late Friday, the Department of Treasury released the following two Interim Final Rules (key points/updates listed below each link):

  1. IFR – Loan Forgiveness
    1. The Lender has 60 days from receipt of the loan forgiveness application to issue a decision to the SBA (change from what I heard prior to 5/22) and request payment from SBA.  (page 7)
    2. The SBA, subject to any audit, has up to 90 days to issue payment and any applicable interest less EIDL Advance Amounts (change from what I heard prior to 5/22; page 7)
    3. Upon receipt of a decision/payment from SBA, Lender then notifies Borrower of the decision and whether the balance of the loan must be paid on or before the two year maturity date (big change because it opens the door for the Lender to call the loan earlier than the maturity date; page 8)
    4. The SBA & the Department of Treasury clarified and provided more flexibility for employers that have different payroll periods (e.g., weekly, monthly, bi-weekly).   Essentially, the borrower’s eight-week period begins on the first day of the first payroll cycle in the covered period (see example on page 10).
    5. Hazard pay and bonuses are allowed to be paid to employees as long as the annual salary of does not exceed $100,000 (as prorated for the covered period; $15,385 for 8 weeks; page 11)
    6. Non-payroll costs incurred but paid on the next billing cycle which is outside the covered 8-week period are eligible for forgiveness (see example on page 12).
    7. Advance payments of eligible mortgage interest are not eligible for forgiveness.
    8. Clarifications on the definition of Full Time Equivalent, the impact of Salary Reduction, attempts to rehire laid off employees who do not want to return, and employees who are fired for cause, voluntarily resign or request a schedule reduction (pages 13-22)
  2. IFR – SBA Loan Review Procedures and Related Borrower and Lender Responsibilities
    1. The SBA may review any PPP loan of any size at their discretion.  (page 7)
    2. The borrower must retain documentation for the PPP loan for 6 years after the loan is forgiven or paid back in full.  (page 8)
    3. If the SBA determines a borrower was ineligible to receive a PPP loan or receive PPP forgiveness, there will be an appeals process.  The appeals process will be outlined in a subsequent IFR.  (page 10)
    4. If the Lender determines that the Borrower is not entitled to forgiveness in any amount, they must notify in writing the SBA and the Borrower with its reason.  The Borrower has 30 days from the denial to request a review of the forgiveness application.  (page 13)
    5. If the SBA determines a Borrower is ineligible for a PPP loan and the lender had already approved it, the Lender’s processing fees are subject to a claw-back.  The timeframe for the SBA to make this determination is 1 year from the date of the PPP loan disbursement.  (page 15)
    6. If an SBA lender does not satisfy its obligations under the PPP regulations, then its lender processing fees are subject to a claw-back and the accompanying loans may lose its SBA guarantee.  (page 16)

Here are some other things that may be important or relevant for you:

Please see all of our prior updates at this link or if you would like to be added to our email list, please click here

As always, please don’t hesitate to email myself (jsanders@mpl-law.com), Andy Miller (amiller@mpl-law.com), Christian Miller (cmiller@mpl-law.com) or anyone in our office with questions or comments.  

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