SBA PPP: Another Set of FAQs
Since the start of the Paycheck Protection Program (“PPP”), the Small Business Administration (“SBA”) has published various FAQs,[1] Interim Final Rules, and other sources of guidance. Specifically, the SBA has updated its original FAQs multiple times to clarify previous guidance, add context, or add new questions. The most recent update to the original FAQs was on August 11.
The same day, the SBA published a separate set of FAQs[2] relating specifically to loan forgiveness (the “Loan Forgiveness FAQs”). Presumably, the SBA compiled the Loan Forgiveness FAQs to provide a more succinct resource for borrowers, as the original FAQs are currently over 18 pages. The Loan Forgiveness FAQs do not contradict the original FAQs, but should be reviewed carefully in conjunction with the other authoritative sources of guidance. This Article highlights the guidance presented in the Loan Forgiveness FAQs that are not addressed in the original FAQs:
- Loan Payment Timing. The Loan Forgiveness FAQs provide that if a borrower submits a timely loan forgiveness application, then the borrower need not make any loan payments until the forgiveness amount is remitted by the SBA to the borrower’s lender. At that time, if the loan is fully forgiven, no payments will be due. If less than all of the loan is fully forgiven, the borrower must repay the balance. The lender is responsible for notifying the borrower of the amount remitted by the SBA and the date on which the borrower’s first payment is due, if any.
- Retirement Benefits as Eligible Payroll Costs. The Loan Forgiveness FAQs clarify that employer contributions to employee retirement benefits constitute eligible payroll costs if paid or incurred during the Covered Period. This does not include contributions for retirement benefits accelerated from periods outside of the Covered Period.
- Owner Compensation. The Loan Forgiveness FAQs provide specific guidance for each type of entity, based on how it is taxed: C corporation, S corporation, self-employed Schedule C or Schedule F filers, general partners, and LLC members. Each section addresses the maximum amount and provides calculation guidelines.
- Nonpayroll Costs. The Loan Forgiveness FAQs include a section on the treatment of nonpayroll costs, which detail which costs are eligible for forgiveness and how the timing of the incurrence of such costs affects forgiveness. For borrowers that use a 24-week Covered Period, this will likely be less of an issue; but for any 8-week Covered Period borrower or other borrower the expends PPP funds on nonpayroll costs, these FAQs provide helpful details.
- Wage Reduction Calculation. The Loan Forgiveness FAQs detail how to calculate the reduction in forgiveness due to a pay reduction in employee wages. The FAQs provide multiple examples to help assist any borrower with such calculation.
When analyzing eligibility, compliance, or other issues related to the PPP loans, both lenders and borrowers should ensure they have consulted the proper sources. If you have any questions regarding the SBA PPP loans, or other aspects of the CARES Act, please contact a Baird Holm LLP attorney.
[1] https://www.sba.gov/sites/default/files/2020-08/Final%20PPP%20FAQs%20%28August%2011%2C%202020%29-508.pdf
[2] https://www.sba.gov/sites/default/files/2020-08/PPP%20–%20Loan%20Forgiveness%20FAQs%20%28August%2011%2C%202020%29-508.pdf
