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Financial Services Law Insights and Observations

SBA, Treasury release PPP loan forgiveness application

Federal Issues Department of Treasury SBA Small Business Lending CARES Act Covid-19

Federal Issues

On May 15, the Small Business Administration (SBA) in consultation with the Treasury Department announced the release of the Paycheck Protection Program (PPP) Loan Forgiveness Application that borrowers must complete in order to have their loans forgiven at the conclusion of the eight-week covered period, which begins upon loan disbursement. The application provides specific instructions, including several measures designed to reduce compliance burdens and simplify the process. These include: (i) “[o]ptions for borrowers to calculate payroll costs using an ‘alternative payroll covered period’ that aligns with borrowers’ regular payroll cycles”; (ii) the flexibility to count any eligible payroll and non-payroll expenses paid or incurred during the eight-week period after the disbursement of a borrower’s PPP loan; (iii) clear instructions on how to perform calculations to confirm eligibility for loan forgiveness as required by the CARES Act; (iv) a safe harbor from forgiveness reduction for borrowers that were able to rehire employees by June 30; and (v) the addition of a new exemption from forgiveness reduction “for borrowers who have made a good-faith, written offer to rehire workers that was declined[.]” The SBA announced it “will also soon issue regulations and guidance to further assist borrowers as they complete their applications, and to provide lenders with guidance on their responsibilities.”

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