U.S. Treasury and SBA Keep Payroll Requirement for PPP Loans

Posted May 18, 2020 at 5:48 pm

Click Here for the Loan Forgiveness Application

The U.S. Department of the Treasury and Small Business Administration (SBA) have released more guidance on the Paycheck Protection Program (PPP). The guidance is in the form of an application and step-by-step instructions for how to calculate the portion of PPP loans that can be forgiven.

The document outlines what documentation is needed as well as what the agencies said are measures “to reduce compliance burdens and simplify the process.” The instructions don’t change the requirement that at least 75% of proceeds must be spent on payroll within the eight weeks after the loan is received, even after TRSA and other small business groups lobbied to address those restrictions. TRSA is advocating for loan recipients to spend more on expenses and for a longer period for spending the proceeds because laundry operators and supplier partners may not be ready to re-open or be fully operational during that period.

Time is short because funds must be spent within the two months after they’re received to qualify for forgiveness. The SBA and Treasury Department missed a deadline last month that was outlined in the legislation creating the program. Guidance and regulations for loan forgiveness was to be issued “not later than 30 days after the date of enactment of this act,” which would have been April 26. Besides the application and instructions released, the SBA also will soon issue regulations and guidance to further help borrowers complete their applications for loan forgiveness and to provide lenders with guidance on their responsibilities.

The program provides loans for as much as $10 million that don’t have to be repaid if proceeds are spent on payroll, rent, utilities and mortgage interest. The forgivable amount is reduced if owners cut jobs or wages, and the balance must be repaid at 1% interest in two years, with the first payment deferred for six months.

The instructions include what the agencies said was a new exemption from the requirement for maintaining employees for borrowers “who have made a good-faith, written offer to rehire workers that was declined.” Some businesses have complained it was difficult rehiring laid-off workers who were earning more in unemployment benefits.

The application also provides the option for borrowers to use an alternative method for calculating payroll costs if their loan disbursement was in the middle of a pay period, and it makes clear that expenses either paid or incurred during the eight-week period can be forgiven. Treasury Secretary Steven Mnuchin has said the rule reflects the intent of Congress to keep workers on payrolls. But he has indicated he’d be open to “technical” revisions if both parties in Congress agree.

Click here for the loan forgiveness application guidance.