The Small Business Administration (SBA) issued an interim final rule that incorporates the loan forgiveness changes of the Paycheck Protection Flexibility Act (Flexibility Act).  On June 23, the SBA released an interim final rule that updates the First Loan Forgiveness Rule and the First Loan Review Rule. These updates reflect the changes that were included in the Flexibility Act. The updated interim final rule can be viewed, here.  The SBA also released a new EZ Paycheck Protection Program (PPP) loan forgiveness application form which can be viewed here. The Flexibility Act required the SBA to create a more “borrower-friendly” application form. The SBA and Treasury also released a revised full PPP loan forgiveness application form, which can be viewed here.  Farmers and ranchers should consult with their accountant, tax preparer and/or financial advisor about the PPP application and loan forgiveness process to ensure all the proper documentation has been completed and reviewed.  A few highlights from the interim final rule include:

  • Reduces the minimum amount of loan forgiveness that comes from payroll costs from 75 percent to 60 percent.
  • Extends the PPP loan forgiveness period to include costs incurred over 24 weeks after a loan is issued or through Dec. 31, whichever comes first. Businesses that received a loan before the measure is enacted could keep the current eight-week period.
  • Establishes a minimum loan maturity period of five years following an application for loan forgiveness, instead of the current two-year deadline set by the SBA. That provision would apply to PPP loans issued after the measure is enacted, though borrowers and lenders could agree to extend current loans.
  • Extends the period in which loans can be forgiven if businesses restore staffing or salary levels that were previously reduced from June 30 to Dec. 31. The provision would apply to worker and wage reductions made from Feb. 15 through 30 days after enactment of the CARES Act, which was signed into law on March 27.
  • Maintains forgiveness amounts for companies that document their inability to rehire workers employed as of Feb. 15, and their inability to find similarly qualified workers by the end of the year. Under the modified measure, companies would be covered separately if they show that they couldn’t resume business levels from before Feb. 15 because they were following federal requirements for sanitization or social distancing.
  • Allows borrowers to defer principal and interest payments on PPP loans until the SBA compensates lenders for any forgiven amounts, instead of the current six-month deferral period. Borrowers that don’t apply for forgiveness would be given at least 10 months after the program expires to start making payments.