SBA Implements PPP Loan Forgiveness Changes in Rule

The Small Business Administration tonight issued a new interim final rule implementing in regulation changes made to the Paycheck Protection Program loan forgiveness process by the PPP Flexibility Act and other recent developments, including the SBA’s simplified Form 3508EZ forgiveness application.

The rule conforms previous rules to reflect provisions of the PPPFA, including the covered period for forgiveness, non-payroll costs eligible for forgiveness, reductions in the forgiven amount and the timing of when borrowers must apply for forgiveness to avoid making payments. It confirms that borrowers may submit forgiveness applications any time on or before the loan matures, including before the end of the covered period,  provided they have used all of the loan funds for which they wish to apply for forgiveness.

The rule also incorporates exemptions in the PPP Flexibility Act that preserve loan forgiveness for employers that made good-faith attempts to rehire employees or fill vacant positions (and retained a previous exemption for employers that have reduced employee hours and offered in good faith to restore them) or whose business could not return to normal because of public health directives. SBA interpreted the latter exemption to include “both direct and indirect compliance” with state and local shutdown orders as well as federal guidance.