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SBA addresses Loan Necessity Questionnaire review process
On December 9, the Small Business Administration (SBA), in consultation with the U.S. Treasury Department updated the PPP FAQs to include a question covering the SBA’s Loan Necessity Questionnaire (for-profit here, non-profit here). Specifically, the SBA has sent a Loan Necessity Questionnaire to lenders to be provided to PPP borrowers that received loans of $2 million or more in order to perform a review for eligibility, fraud or abuse, and compliance with loan forgiveness requirements. The FAQs emphasize that being asked to complete a questionnaire “does not mean that SBA is challenging a borrower’s certification that is required by the CARES Act.” Moreover, after a borrower submits its completed questionnaire, the FAQs note that the SBA may request additional information, if necessary, to complete its review. At this point, the SBA states that borrowers will have an opportunity to provide a narrative response explaining the circumstances that provided the basis for their good-faith loan necessity certification. The SBA intends to “take into account the borrower’s circumstances and actions both before and after the borrower’s certification to the extent that doing so will assist SBA in determining whether the borrower made the statutorily required certification in good faith at the time of its loan application.”
SBA clarifies loan forgiveness application deadline
On October 13, the Small Business Administration (SBA) updated the Paycheck Protection Program (PPP) loan forgiveness FAQs to include a new question covering the PPP loan forgiveness application forms (3508, 3508EZ, and 3508S). Specifically, the SBA notes that even though the application forms display an expiration date of October 31, that is not a deadline to apply for forgiveness. Rather, the date posted on the forms is displayed for Paperwork Reduction Act purposes and will be extended when the same forms are re-approved. Borrowers may submit loan forgiveness applications any time before the maturity date of the loan, which can be either two or five years after origination.
SBA simplifies PPP forgiveness for loans under $50K
On October 8, the Small Business Administration (SBA), in consultation with the U.S. Treasury Department, announced a more streamlined loan forgiveness application for Paycheck Protection Program (PPP) loans of $50,000 or less. According to the interim final rule released with the application and application instructions, lenders may rely on the borrower representations of the forgiveness amount, stating that a “lender does not need to independently verify the borrower’s reported information if the borrower submits documentation supporting its request for loan forgiveness and attests that it accurately verified the payments for eligible costs.” Moreover, should a borrower apply for forgiveness of costs exceeding the borrower’s PPP loan amount, the lender should confirm the borrower’s calculations on the loan forgiveness application, “up to the amount required to reach the requested [f]orgiveness [a]mount.” The SBA notes that it began approving PPP forgiveness applications and remitting payments to lenders on October 2 and “will continue to process all PPP forgiveness applications in an expeditious manner.”
Additionally, on October 7, the SBA updated the PPP FAQs to add a question on the payment deferral extension granted by the PPP Flexibility Act. As previously covered by InfoBytes, the PPP Flexibility Act extends the six-month payment deferral period to at least 10 months after the program expires. Specifically, the FAQs confirm that the extension of the deferral period will automatically apply to all PPP loans, requiring lenders to “give immediate effect to the statutory extension and [] notify borrowers of the change to the deferral period.” Moreover, the FAQs emphasize that the SBA does not require a formal modification of the promissory note.
IRS: Lenders should not report PPP debt forgiveness
On September 22, the IRS released Announcement 2020-12 notifying lenders that they should not report the amount of qualifying loan forgiveness for covered loans to qualifying small businesses made under the Paycheck Protection Program (PPP).The IRS code generally requires lenders to file a Form 1099-C for any discharge of indebtedness of at least $600. However, the IRS’ announcement specifies that when a portion or all of the principal is forgiven under the requirements of Section 1106 of the CARES Act, lenders, for federal income tax purposes only, should not “file a Form 1099-C information return with the IRS or provide a payee statement to the eligible recipient under section 6050P of the Code as a result of the qualifying forgiveness.”
SBA clarifies PPP forgiveness for certain business owners, non-payroll costs
On August 27, the Small Business Administration (SBA) issued a new interim final rule (IFR), which provides additional guidance for Paycheck Protection Program (PPP) lenders on the treatment of business owners and the forgiveness of certain non-payroll costs. The new IFR specifies that “owner-employees with less than a 5 percent ownership stake in a C- or S- Corporation are not subject to the owner-employee compensation rule.” The SBA explained that the exemption, which was decided upon in consultation with the Secretary of Treasury, is intended to cover owner-employees who “have no meaningful ability to influence decisions over how loan proceeds are allocated.” With respect to the forgiveness of certain non-payroll costs, the SBA clarified that costs attributable to the business operations of tenants or sub-tenants of a PPP borrower or, for household expenses of home-based businesses, do not qualify for forgiveness. However, rent payments to a related third party are eligible for loan forgiveness under certain conditions. The IFR takes effect upon publication in the Federal Register. Comments on the provisions are due within 30 days.
Federal agencies and CSBS to hold webinar on PPP
On August 20, the FDIC, Federal Reserve Board, OCC, NCUA, and the Conference of State Bank Supervisors announced that a webinar will be held with SBA officials discussing the loan forgiveness process and recent changes in the Paycheck Protection Program on Thursday, August 27 from 11:00 a.m. to 12:00 p.m. (EDT). Participants must preregister for the webinar and are encouraged to email questions in advance to asktheregulators@stls.frb.org. An archive of the webinar materials will be available here, a few hours after the webinar ends.
SBA issues new PPP FAQs and clarifies appeals process
On August 11, the Small Business Administration (SBA) updated the Paycheck Protection Program (PPP) FAQs to include two new questions clarifying that (i) payment or nonpayment of fees of an agent or other third party will not affect the guarantee of a PPP loan or the SBA’s payment of lender fees; and (ii) vision and dental benefits are included in the payments required for the provision of group health care benefits. The SBA also published three new FAQs on PPP loan forgiveness, addressing PPP loan forgiveness when the borrower has also received an Economic Injury Disaster Loan (EIDL) advance. Additionally, the SBA issued a new interim final rule, which informs PPP borrowers and lenders of the appeal process for certain SBA loan review decisions under the PPP to the SBA Office of Hearings and Appeals.
SBA issues new FAQs on forgiving PPP loans
On August 4, the Small Business Administration (SBA) issued new FAQs on Paycheck Protection Program (PPP) loan forgiveness. The FAQs note that borrowers and lenders may rely on the FAQs as the SBA’s interpretation of the CARES Act, the Paycheck Protection Program Flexibility Act (Flexibility Act), and all of the Paycheck Protection Program Interim Final Rules (available here). The FAQs cover various topics including (i) general loan forgiveness; (ii) loan forgiveness of payroll and nonpayroll costs, and types of costs that constitute payroll and nonpayroll costs; and (iii) loan forgiveness reductions. For continued InfoBytes coverage on PPP loan forgiveness see here.
Small Business Administration issues notice regarding forgiveness of Paycheck Protection Program loans
On July 23, the Small Business Administration issued a procedural notice providing information for Paycheck Protection Program lenders on submitting decisions on PPP borrower loan forgiveness applications to the SBA, requesting payment of the forgiveness amount, SBA loan forgiveness reviews, and payment of loan forgiveness amounts. For example, the notice provides instructions regarding documentation and data that the lender must submit when it issues a decision on loan forgiveness. The notice also indicates that the SBA intends to issue an interim final rule addressing how a borrower may appeal the SBA’s determination that it is ineligible for a PPP loan or ineligible for the loan amount or the loan forgiveness amount claimed by the borrower.
SBA updates PPP FAQs
On June 25, the Small Business Administration (SBA) updated the Paycheck Protection Program (PPP) FAQs to include new details about the maturity dates of the PPP loans. Specifically, the FAQs note that if a PPP loan received an SBA loan number on or after June 5, the loan has a five-year maturity. Any loan that received an SBA loan number prior to June 5 has a two-year maturity, unless the borrower and lender agree to extend the term to five years. Additionally, the SBA updated two additional questions to reflect changes made by the Paycheck Protection Program Flexibility Act of 2020 (the Flexibility Act), previously covered by InfoBytes here. First, the Flexibility Act extended the covered period for loan forgiveness from eight weeks after the date of loan disbursement to 24 weeks. The FAQs note that the 24-week period applies to all borrowers, but any borrower that received an SBA loan number prior to June 5, may still use the eight-week period. Finally, the FAQs now reflect the new felony conviction standards of PPP eligibility. On June 12, the SBA reduced the look-back period from five years to one year for any felony conviction that does not involve fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance of any owner of 20 percent or more of the equity in the applicant (covered by InfoBytes here).