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On Wednesday, SBA and Treasury posted this guidance to implement the changes to the PPP made by the Paycheck Protection Flexibility Act.

Here is what you need to know:

  • The new guidance simply revises sections of the existing guidance, so that existing guidance is still the basis for PPP decisions and calculations.
  • The new guidance also confirms that the last date that SBA can guarantee a PPP loan is June 30, 2020.

The new guidance addresses the following issues:

  • Maturity date of PPP loans – for loans made on or after June 5, 2020, the maturity is five years. For loans made before June 5, borrowers and lenders may mutually agree to extend the maturity of the loan to five years, but there is no requirement to do so.
  • Deferral of PPP loan payments – borrowers who apply for forgiveness within 10 months of the end of the loan period do not have to make any payments on their loan until the SBA remits the forgiveness amount to the lender, or notifies the lender that no forgiveness is allowed. Borrowers who don’t apply for forgiveness at all will have to start making payments no sooner than that 10-month date.
  • 60/40 impact on forgiveness – if borrowers spend 60% or more on payroll expenses, there is no forgiveness reduction due to the 60/40 rule. If borrowers spend less than 60% on payroll expenses, the actual amount a borrower spends on payroll must constitute 60% of the forgiveness amount. The example given in the guidance is as follows:
    • A borrower receives a $100,000 PPP loan
    • Borrower spends 54% of the loan – $54,000 – on payroll costs, therefore facing a decrease in total forgiveness
    • $54,000 constitutes 60% of the possible forgiveness amount, making the total possible forgiveness $90,000 (60% or $54,000 for payroll, 40% or $36,000 for nonpayroll

We expect additional guidance and an updated forgiveness form in the coming days, and will share more information as we receive it.