SBA PPP Closes and Other Recent Updates

On August 8, 2020, the Small Business Administration (“SBA”) announced it was no longer accepting loan applications for the Paycheck Protection Program (“PPP”), despite the large amount of funding still available. The SBA also released the following guidance in the month of August:

• FAQ #50. On August 11, the SBA released a new version of its FAQs, clarifying that the payment or nonpayment of fees of an agent or other third party is not material to the SBA’s guarantee of a PPP loan.

• FAQ #51. On the same day, the SBA clarified that the phrase “group health care benefits, including insurance premiums” include vision and dental benefits for purposes of qualifying as eligible payroll costs.[1] Prior to the release of this FAQ, many presumed that such benefits were not eligible payroll costs.

• Twenty Third Interim Final Rule (Appeals of SBA Loan Review Decisions). The SBA has released the process for appealing certain SBA loan review decisions under the PPP to the SBA Office of Hearings and Appeals (OHA). The borrower can appeal decisions as to eligibility, amount received, a lender’s approved amount of forgiveness, or a lender denial of forgiveness. The IFR includes a list of information required for an appeal as well as the review process. https://www.sba.gov/sites/default/files/2020-08/PPP%20–%20IFR%20–%20OHA%20%288.11.2020%29%20%28final%29%28kb%208.11.20%20212pm%29%5B1%5D-508.pdf

• Twenty Fourth Interim Final Rule (Treatment of Owners and Forgiveness of Certain Nonpayroll Costs). This IFR covers a few different issues:

• • First, the IFR provides that owner-employees with less than a 5% ownership stake in a C corporation or S corporation are not subject to the previously-released “owner-employee compensation rule”, which caps the amount of loan forgiveness for payroll compensation attributable to an owner-employee.

• • The IFR also clarifies that amounts attributable to the business operation of a tenant of the PPP borrower or certain household expenses for home-based businesses are not eligible for forgiveness.

• • Finally, the IFR allows rent paid to a related party to be eligible for forgiveness in certain situations. https://www.sba.gov/sites/default/files/2020-08/PPP%20IFR%20-%20Ownership-508.pdf

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