On May 22, the Small Business Administration and the Treasury Department released its latest guidance in the form of two interim final rules on loan forgiveness: “Business Loan Program Temporary Changes; Paycheck Protection Program –Requirements – Loan Forgiveness” and “Business Loan Program Temporary Changes; Paycheck Protection Program – SBA Loan Review Procedures and Related Borrower and Lender Responsibilities.” This, coupled with Treasury’s recent Loan Forgiveness Application gives borrowers seeking forgiveness of their Paycheck Protection Program loans a better understanding of the process, subject to future regulatory or legislative changes.

Forgivable Uses of PPP Loans

The forgivable uses are:

• You must spend at least 75% of the forgivable amount of your PPP loan on payroll costs

• Payroll costs for U.S.-resident employees, consist of

  • Salary, wage, commission or similar compensation (up to $100,000 per employee)

  • Cash tips or equivalent

  • Payment for vacation, parental, family, medical, or sick leave (other than qualified family or sick leave wages for which a credit is allowed under Sections 7001 or 7003 of the Families First Coronavirus Response Act) Allowance for dismissal or separation

  • Payment required for the provision of group health care benefits, including insurance premiums

  • Payment of any retirement benefit

  • Payment of state or local tax assessed on the compensation of employees

• You may not spend more than 25% of the forgivable amount of your PPP loan on nonpayroll costs, consisting of:

  • Payment of interest on a business mortgage obligation for real or personal property entered into prior to Feb. 15, 2020 (but not on principal prepayments or payment of principal),

  • Payments on business rent obligations on real or personal property under a lease agreement in force prior to Feb. 15, 2020

  • Business utility payments (for which service commenced prior to Feb. 15, 2020, consisting of:

    • Electricity

    • Gas

    • Water

    • Transportation (waste removal)

    • Telephone

    • Internet access

Loan Forgiveness Process Generally

A borrower must complete and submit the Loan Forgiveness Application (or its lender’s equivalent) to its lender or the lender servicing its loan.  Bear in mind that your PPP loan may have been sold to another SBA lender, although your original lender may still be the servicer on the loan.  The lender is generally the entity making a determination on your loan forgiveness and has 60 days from the receipt of a complete application to issue a decision to the SBA.  The SBA has 90 days from the date or receipt of the complete loan forgiveness application from the lender, subject to any review of the loan or application, to remit the forgiveness amount to your lender.