The SBA’s Paycheck Protection Program (PPP) loans were designed to help small businesses and professionals cover essential operating expenses. A PPP loan can be forgiven to the extent that it is spent during the eight weeks following receipt of the loan, and if at least 75% is spent on payroll, medical insurance, and pension contributions. The remaining 25% can be spent on rent, interest, and utilities.
In its most recent FAQ release (see FAQ #31), the SBA reminded borrowers that forgiveness of PPP loans also depends on applicants demonstrating that the loan was “necessary to support the on-going operations” of the business.
Specific loan forgiveness guidance and reporting requirements are not yet available from the SBA.
However, the SBA has issued an extension to the safe harbor repayment date. Any borrower who applied for a PPP loan before April 24, 2020 and repays the loan in full by May 14, 2020 will be deemed by SBA to have “made the required certification in good faith.” This means borrowers considering repaying the loan (because they are questioning whether the loan was “necessary to support the on-going operations” of the business) should strongly consider doing so prior to May 14, 2020, which is the end of the “no fault” return policy.
The most recent FAQ release, along with other information about PPP loans, is available from the SBA’s website.