The Small Business Administration and Treasury Department issued new guidance on Tuesday, June 24.
Most notable among the new SBA and Treasury guidance is a clarification for borrowers who have both a Paycheck Protection Program and an Economic Injury Disaster Loan (EIDL), as well as a new Interim Final Rule from Treasury.
To help keep our banks and credit unions up to date on the latest PPP rules and guidance, we’ve broken down these new developments below.
The SBA Issues a Procedural Notice on EIDLs
Borrowers who have taken out both PPP and EIDL loans may be eligible for refinancing. To that end, the SBA has released guidance that provides clarification around refinancing EIDL loans with PPP loan proceeds, as well as the remittance process with the SBA.
This guidance is specific to PPP originations.
It requires the bank capture information such as the date when the EIDL was received and the use of proceeds, and it does not impact the PPP forgiveness calculation. For more information, read the official guidance here.
The Treasury Department Issues a New Interim Final Rule
While the latest Interim Final Rule can be read in its entirety here, the most notable guidance is broken down for you here:
- Borrowers do not need to wait to submit forgiveness applications until the end of their chosen 8-week or 24-week covered period. Borrowers can submit forgiveness applications at any point during the covered period. However, if a borrower applies for forgiveness before the end of the covered period and has reduced any employee’s salaries or wages in excess of 25 percent, the borrower must account for the excess salary reduction for the full 8-week or 24-week covered period, as described in Part III.5.
- Lenders are responsible for notifying borrowers of remittance by the SBA of the loan forgiveness amount—or notify the borrower that the SBA has determined no amount of their PPP loan is eligible for forgiveness. Additionally, lenders must notify borrowers with post-forgiveness loan balances of their first loan payment due date. This reinforces our perspective that loan modifications will be a necessary component of the forgiveness process.
- The Treasury has clarified that reductions in business activity stemming from COVID requirements or guidance from State and Local governments will be counted towards a borrower’s forgiveness eligibility.
- The PPP Flexibility Act provides new general guidance around a borrower’s rights. Specifically, it clarifies that borrowers, in some circumstances, can request that their lender reconsider its decision to deny a forgiveness application, or to request that the SBA review the lender’s decision to deny the forgiveness application.
- Additionally, the PPP Flexibility Act deletes the provision in Interim Final Rule 15, which stated that the SBA will issue additional procedures around the advance purchase of PPP loans.
Stay Ahead of the PPP Lending and Forgiveness Curve
We’re just days away from the June 30 PPP originations deadline, and while activity has slowed we fully expect businesses to be applying for PPP loans up until the final day possible.
Of course, June 30 doesn’t mark the end of the Program, as the PPP Forgiveness portion of the equation that is still largely being solved. As we’ve discussed in past blogs, Q&A Sessions, and even Product Demos, Forgiveness is a process that the SBA and Treasury continue to issue new guidance and rules around (on a seemingly weekly basis) and one that could potentially stretch on for years.
To help keep banks and credit unions ahead of the PPP Curve, we’ve been dedicating our twice weekly Insights Sessions—including Q&A Sessions on Tuesdays at 3PM ET and Demo Sessions of Fridays at 1PM ET—to this topic and will continue to do so as long as lenders find it useful.
Our next Insights Session covering PPP will be our Demo Session this Friday, where we’ll be showing how Form 3508 and the new 3508EZ forgiveness application work in our platform and makes PPP Forgiveness easy for lenders and borrowers.