Lynn Woosley is a Senior Director with Treliant. She is a seasoned executive with extensive risk management experience in regulatory compliance, consumer and commercial credit risk, credit and compliance risk modeling, model governance, regulatory change management, acquisition due diligence, and operational risk in both financial services and regulatory environments.
- Source: home.treasury.gov
Treliant knows risk management. If you need assistance with assessing and managing the impact of PPP loans, Treliant can help.
On June 1, 2020, the Small Business Administration (SBA) issued an interim final rule (IFR) and application for forgiveness of Paycheck Protection Program (PPP) loans. The IFR includes instructions for calculating eligible expenses, applying the rule requiring that payroll costs account for at least 75 percent of forgiven eligible expenses, and determining the payroll period for calculations. It also provides instructions for estimating reductions in forgiveness due to either reductions in salaries and wages or reductions full-time equivalent employees (FTEs). Finally, the IFR specifies recordkeeping requirements associated with forgiveness applications. The forgiveness application form incorporates voluntary reporting of demographic information, including veteran status, sex, race, and ethnicity.
Despite the release of the IFR and application, changes in forgiveness requirements are expected. Both the U. S. House and Senate have passed Paycheck Protection Flexibility Act, which is expected to be signed into law. If enacted, the following changes are likely:
- Extension of the covered payroll period to up to 24 weeks, as long as the period ends before December 31, 2020;
- Reduction in the required payroll proportion of forgiven expenses from 75 percent to 60 percent;
- Additional exceptions for good faith efforts to restore their workforces if qualified employees were unavailable or ongoing operating restrictions related to COVID-19 made the business unable to resume full operations;
- Extension of repayment periods for unforgiven loans to five years, rather than the current two years; and
- The ability to delay payment of payroll taxes.
The proposed changes address many of the concerns related to the IFR and forgiveness application. If adopted, more PPP borrowers will be able to achieve full forgiveness.