Updated: Sources For Updates On SBA PP Loans

President Trump signed the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act on March 27, 2020. The Act, among other things, apportions $349 billion to the “Paycheck Protection Program” (“PPP”), which authorizes small business loans guaranteed by the Small Business Administration (“SBA”) under Section 7(a) of the Small Business Act, and $10 billion for certain economic injury disaster loans (“EIDLs”) made under Section 7(b) of the Small Business Act. 

Since the CARES Act was signed into law, the guidance for PPP loans has been changing on an almost daily basis, making compliance for both borrowers and lenders difficult. This Article identifies the sources that the SBA has released in interpreting the PPP under the CARES Act. Notably, such sources and guidance are constantly being updated, therefore, anyone seeking answers should ensure they have identified all potentially governing materials and that they are relying on the most recent version.

1. The CARES Act. While lengthy, a review of the legislation itself proves to be a fruitful starting point in analyzing requirements and compliance. A link to the text can be found here.
2. First Interim Final Rule. On April 2, the SBA interpreted the CARES Act by issuing an Interim Final Rule. Notably, some interpretations contained in the Interim Final Rule, such as the interest rate for PPP loans, are contrary to the requirements of the CARES Act itself. A summary of the interpretations can be found in our article “CARES Act – Small Business Lending”. The text of the Interim Final Rule can be found here (85 FR 20811; April 15, 2020). 
3. Second Interim Final Rule (Affiliation Rules). The following day, the SBA published a second Interim Final Rule, which specifically addresses the “affiliation rules” for purposes of determining whether an employer is eligible for a PPP. The text of the Third Interim Final Rule can be found here (85 FR 20817; April 15, 2020).
4. Affiliation Guidance. Along with the publication of the supplement to the Interim Final Rule, the SBA published a guide specific to affiliation rules. The text of such guidance can be found here.

5. FAQs for Faith-Based Organizations. On April 3, the SBA also published a set of FAQs specific to faith-based organizations, addressing both PPP and the EIDL. The text of those FAQs can be found here. 
6. FAQs. The SBA has published multiple versions of “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. 
7. Third Interim Final Rule (Self-Employers and Pledges). On April 14, the SBA released a Third Interim Final Rule, which provides guidance for individuals with self-employment income who file a Form 1040, Schedule C and addresses eligibility issues for certain business concerns and requirements for certain pledges of PPP loans. The text of the Third Interim Final Rule can be found here (85 FR 21747; April 20, 2020). 
8. Fourth Interim Final Rule (Large Employers).  On April 24, the SBA released a Fourth Interim Final Rule providing guidance to lenders on discrete topics, including guidance regarding the self-certification as to the necessity of the loan request. The text of the Fourth Interim Final Rule can be found here (85 FR 23450; April 28, 2020).
9. How to Calculate Maximum Loan Amounts – By Business Type. On April 24, the SBA released guidance on calculating maximum loan amounts directed at: self-employed individuals with no employees; self-employed individuals with employees; certain self-employed farmers; partnerships; corporations; eligible not-for-profit organizations and religious institutions, veterans’ organizations, and tribal businesses; and LLC owners (whose instructions vary, depending on whether they file as a sole proprietor, partnership, or corporation). The guidance can be found here.

10. Fifth Interim Final Rule (Seasonal Employers). On April 27, the Department of the Treasury released a Fifth Interim Rule providing an alternate time period to measure payroll for seasonal employers to potentially allow seasonal employers to qualify for a larger PPP loan amount. The alternative time frame does not otherwise affect the requirements of the PPP. The text of the Fifth Interim Rule can be found here (FR Doc. 2020-09239; April 28, 2020). 
11. Sixth Interim Final Rule (Disbursements). On April 28, the SBA released a Sixth Interim Rule that states that a lender may only make one disbursement of PPP loan funds to a borrower. The disbursement must be made within 10 calendar days of loan approval. The Rule discusses what form lenders use to inform the SBA of loan disbursements and deals with related timing issues. The text of the Sixth Interim Rule can be found here.

12. Seventh Interim Final Rule (Corporate Groups and Non-Bank and Non-Insured Depository Institution Lenders). On April 30, the SBA released guidance that companies that are part of a “single corporate group” cannot receive more than $20 million in aggregate PPP loans. Businesses that are majority owned, directly or indirectly, by a common parent are within a single corporate group for this purpose. This new requirement is effective only with respect to loans that have not been fully disbursed as of April 30, 2020. The Rule also discusses lender eligibility of non-bank and non-insured depository institution lenders. The text of the Seventh Interim Rule can be found here.
13. Notice 2020-32 (Deductibility of PPP-funded Business Expenses). On April 30, the IRS released Notice 2020-32. The Notice announces that taxpayers may not deduct payroll, mortgage interest, rent or utility expenses that were paid with PPP loan proceeds. The guidance also confirms that forgiven PPP loans will not be included in a taxpayer’s gross income as discharge of indebtedness income. 
14. Eighth Interim Final Rule (Nondiscrimination and Additional Eligibility Criteria). On May 5, the SBA released guidance clarifying that student workers generally count as employees for purposes of determining eligibility under the PPP. There is an exception provided for applicants that are institutions of higher education, where the student worker’s services are performed as part of a work-study program. The interim final rule also clarified that the nondiscrimination provisions in the SBA regulations incorporate exemptions provided in federal nondiscrimination laws for sex-specific admissions practices, sex-specific domestic violence shelters, coreligionist housing and tribal preferences in connection with adoption and foster care practices under the Indian Child Welfare Act of 1978. The text of the Eighth Interim Rule 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.