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New Guidance on PPP Loan Forgiveness

Written by Soo Yeon Lee, Esq.


The SBA has issued two new Interim Final Rules on the PPP on loan forgiveness and SBA loan review procedures. PPP loan forgiveness application is now also available. The application can be found here.


[A new development: On June 3, 2020, Senate passed the bill to give businesses flexibility and to ease rules about how small businesses can use Paycheck Protection Program loans. Under the proposal, small businesses would have to spend 60% of the loan money on payroll instead of the previous 75%. They could use the funds for six months, a change from two months. The proposal would extend a June 30 deadline to rehire workers. More information is forthcoming.]


Some of the key information from the above new guidance and forgiveness application is as follows:



1. Exceptions to Reductions in Loan Forgiveness Amounts: Full Time Equivalent (“FTE”) ratio will not be affected by positions for which...


2. Exemptions are available to borrowers who have rehired employees and restored salary and wage levels by June 30 if...

  • A borrower’s FTE count on June 30 is reinstated to the FTE count on February 15, then the FTE ratio used to potentially reduce forgiveness is restored to 1.0

  • An employee’s salary was reduced more than 25% after February 15, there will be no penalty if that salary is fully restored by June 30


3. Forgiveness will be allowed for payments “incurred” during the 8-week period so long as payment is made on the next payroll date (for payroll costs) or the next applicable due date (for non-payroll costs).



4. A simplified method to calculate FTE's is available as an option. FTE can be calculated on the basis of either...

  • Hours paid per week divided by 40 (capped at 1.0)

  • All part-time employees counted as 0.5 FTE


** The information contained here has been prepared for informational purposes only and is not legal advice. This material describes issues in general terms, and good legal advice required detailed analysis of particular facts and circumstances.

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