Recently, 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
Read the full GT Alert “PPP Loan Forgiveness: What the Latest Guidance Means for You”