May 22 Update: PPP Final Interim Rules Provide Further Forgiveness Guidance


Business owners can now apply for forgiveness directly with the Small Business Administration (SBA). This option is only available to borrowers with loans of $150,000 or less -- which is 95 percent of all loans issued in 2021.

The new forgiveness platform for loans $150,000 or less began accepting applications from borrowers on August 4th, 2021, here:

SBA Forgiveness Portal

Borrowers that need assistance or have questions should call the SBA at (877) 552-2692, Monday – Friday, 8 a.m. - 8 p.m. EST.

If your PPP amount is over $150, 000 and you received your PPP loan through a bank in the SmartBiz network, your bank will be contacting you directly about applying for Forgiveness. Otherwise, you should reach out to your lender for information about when you can apply with them.

SBA Administrator Isabel Casillas Guzman shares additional details in an SBA press release:

“These entrepreneurs are busy running their businesses and are challenged by an overly complicated forgiveness process. We need to deliver forgiveness more efficiently so they can get back to enlivening our Main Streets, sustaining our neighborhoods and fueling our nation’s economy.”

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On Friday, May 22nd, the SBA released the new 26 page Interim Final Rules that adds information to the Loan Forgiveness Application and Instructions. This Interim Final Rules document clears up several items and answers a number of frequently asked questions.

A second set of Interim Final Rules, also released on May 22nd with 19 pages, provide guidance to the SBA loan review process as well as borrower and lender responsibilities.

The Senate could vote as early as this week on a bill that would double the loan forgiveness period to 16 weeks. The House is expected to vote this week on standalone legislation that would extend the loan forgiveness period to as long as 24 weeks and also eliminate the rule requiring PPP borrowers to spend at least 75% of the funds on payroll costs to qualify for full loan forgiveness. A separate Senate bill would also expand the loan forgiveness period to 24 weeks and eliminate the 75% rule.

For now, here is the new information from the Interim Rules to date. Keep an eye on the news from the government to determine if new guidelines have been put into place.

New PPP forgiveness guidance

While much of the guidance is the same found in the PPP loan forgiveness application and instructions, here are details to pay attention to:

1. Watch the calendar.

The Interim Final Rules state that the first PPP loans were disbursed after April 3rd. These business owners are already in their 6th week of spending to facilitate forgiveness. Your forgiveness application must be filed by October 31, 2020.

2. Review newly defined terms (including footnotes).

The Interim Final Rules reiterate that borrowers will be eligible for forgiveness in an amount equal to “costs and payments” that include payroll costs, interest on mortgage obligations, rent, and utilities. Footnote 2 of page 6 outlines the language in greater detail indicating in part that this is for cash tips or the equivalent.

3. Plan for interest, rent, and utilities.

The Interim Final Rules indicate that the total costs for interest, rent and utility payments “cannot exceed 25% of the loan forgiveness amount.” This is another way of saying that 75% of the total forgiveness has to be based upon expenses paid for payroll, health insurance, and retirement contributions.

4. Eligible vs. non eligible interest payments.

Page 13 of the new Interim Final Rules reads that advance payments of interest are not eligible for loan forgiveness because the CARES Act’s language specifically excludes “prepayments” of interest owed. However, interest that has accrued before the beginning of the eight week period and paid during the eight week period would seem to be covered based upon the language later in the rules.

5. Payroll calculation.

The Interim Final Rules detail the timing of payroll costs, and how the new Alternative Payroll Covered Period included in the Loan Forgiveness Application and instructions will work. Borrowers can now use their normal payroll period of one week or two weeks.

6. Bonuses/hazard pay.

Compensation paid to a furloughed employee, along with bonuses and “hazard pay” will be legitimate payroll costs. Exception: If these amounts result in an employee’s total compensation above $15,385 ($100,000 times 8/52nds) during the measurement period.

7. Rules for self-employed (independent contractors or sole proprietors).

The Interim Final Rules emphasize that there is no forgiveness provided for retirement or health insurance contributions made for the self-employed or General Partners. The reasoning is that “such expenses are paid out of their net self-employment income.”

8. Headcount reduction relief.

On page 22 of the Interim Final Rules, an employee who is “fired for cause, voluntarily resigns, or voluntarily requests a schedule reduction” will not be counted as no longer being in the business for the “fewer employees” reduction test. The Rules also add that “borrowers should not be penalized for changes in employee headcount that are the result of employee actions and requests.”

9. Employment classification.

The Interim Final Rules also define “full-time equivalent employee” to mean an employee who works 40 hours or more, on average, each week. Hours in excess of 40 are disregarded for purposes of determining whether there has been a reduction in the number of employees. The Interim Final Rules give more guidance on the election that borrowers can make to consider all part-time employees to be working exactly 20 hours a week for calculation purposes. The Interim Final Rules also confirm that employees who were hired in 2020 will be included in the reduction calculation.

DISCLAIMER: The SmartBiz® Small Business Blog and other related communications from SmartBiz Loans® are intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.