SBA Publishes Three Interim Final Rules Leading Into Holiday Weekend
Since the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was signed into law, the guidance for the Small Business Administration’s (“SBA”) Payroll Protection Program (“PPP”) has been changing on an almost daily basis, making compliance for both borrowers and lenders difficult.
Our previous articles identified the sources that the SBA released through and including May 18, 2020. This article supplements our May 6th and May 20th articles by summarizing three (3) Interim Final Rules that have been published since that date.
- Thirteenth Interim Final Rule (Second Extension of Limited Safe Harbor with Respect to Certification Concerning Need for PPP Loan and Lender Reporting). On May 21, the SBA published a Thirteenth Interim Final Rule, officially extending the safe harbor repayment date to May 18. This IFR also includes lender reporting requirements for borrowers that return their loan pursuant to the safe harbor. The text of the Thirteenth Interim Final Rule can be found here.
- Fourteenth Interim Final Rule (Loan Forgiveness). On May 22, the SBA published a Fourteenth Interim Final Rule detailing many of the rules that were contained in the previously released Loan Forgiveness Application and Instructions. In addition, this rule clarified many new rules regarding calculations and exemptions contained in the Instructions. Among other things, this rule provides that the salary/wage reduction applies only to the portion of the decline in employee salary and wages that is not attributable to the FTE reduction. Thus, if an employee’s hours are reduced during the covered period, but the employee’s hourly wage rate is unchanged, the borrower is not required to conduct a salary/wage reduction calculation for that employee. In addition, the rule expressly provides that hazard pay and bonuses are eligible “payroll costs,” which had not been previously addressed. The text of the Fourteenth Interim Final Rule can be found here.
- Fifteenth Interim Final Rule (SBA Loan Review Procedures and Related Borrower and Lender Responsibilities). Simultaneously with the publication of the Fourteenth Interim Final Rule, the SBA published a Fifteenth Interim Final Rule, summarizing the procedural requirements imposed on lenders in their review of any loan. The SBA stated that borrowers will have an opportunity to respond to the SBA’s review and indicated there would be more guidance yet to come regarding an appeal process. Relatedly, the SBA prohibited lenders from taking a processing fee if the SBA determines that the borrower was not eligible for the loan. The text of the Fifteenth Interim Final Rule can be found here.
- FAQs. Finally, the SBA continues to update its “frequently asked questions.” Lenders and borrowers should expect that future versions of these FAQs will continue to be published. The text of the most recent FAQs can be found here.
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.