What PPP Loan Borrowers Need to Know About the Interim Final Rules on PPP Loan Forgiveness

May 29, 2020

By: Eric N. Fischer, Rod Kubat

On May 22, 2020, the Small Business Administration (SBA) issued an interim final rule on loan forgiveness and SBA Loan Review Procedures. The rule elaborates on the Paycheck Protection Program (PPP) Loan forgiveness process that was initially released through the PPP Loan Forgiveness Application. For additional information on the PPP Loan Application, see our post on the Top Ten Takeaways from the PPP Loan Application


The Interim Final Rule did not deviate significantly from the PPP Loan Application; however, SBA did make several clarifications that are important for PPP Loan borrowers seeking loan forgiveness:


  1. The SBA reiterates the requirement that nonpayroll costs cannot exceed 25 percent of the loan forgiveness amount.

  2. To receive loan forgiveness, a borrower must complete the Loan Forgiveness Application and deliver it to its lender. The lender will review the application and make a decision regarding loan forgiveness within 60 days of receipt of the application and send that decision to SBA. SBA will, subject to any SBA review of the loan or loan application, remit the appropriate forgiveness amount to the lender, plus any interest accrued through the date of payment, not later than 90 days after the lender issues its decision to SBA.

  3. SBA clarified that payroll costs for employees that are not performing work, but are still on payroll are incurred based on the schedule typically established by the borrower (typically, each day that the employee would have performed work).

  4. SBA clarified that salary, wages, or commission payments to furloughed employees’ bonuses and hazard pay are payroll costs eligible for loan forgiveness to the extent total payroll costs paid to an employee do not exceed $15,385.00 during the applicable Covered Period.

  5. Nonpayroll costs paid during the Covered Period (even for expenses incurred prior to the Covered Period) or incurred during the Covered Period and paid on or before the next regular billing date (even if outside of the Covered Period) are eligible for forgiveness.

  6. SBA expanded on the requirements for the rehire refusal FTE exemption. In calculating loan forgiveness, a borrower may exclude any reduction in full-time employee headcount that is attributable to an individual employee if:

    1. the borrower made a good faith, written offer to rehire such employee (or, if applicable, restore the reduced hours of such employee) during the Covered Period or the Alternative Payroll Covered Period;
    2. the offer was for the same salary or wages and same number of hours as earned by such employee in the last pay period prior to the separation or reduction in hours;
    3. the offer was rejected by such employee;
    4. the borrower has maintained records documenting the offer and its rejection; and
    5. the borrower informed the applicable state unemployment insurance office of such employee’s rejected offer of reemployment within 30 days of the employee’s rejection of the

      The Interim Final Rule on Loan Forgiveness adds the requirement that borrower informs the applicable state unemployment insurance office of the employee’s rejection of the offer to return to work.

  7. SBA clarified that the Wage Reduction test applies only to base salary or wages paid between January 1, 2020 and March 31, 2020.

  8. SBA clarified that it may review any PPP loan as it deems appropriate in its discretion. During a review SBA indicated that it could review: (i) borrower eligibility for a PPP Loan, (ii) the information, certifications, and representation on the borrower’s PPP Loan application form, (iii) the PPP Loan amount and the use of the loan proceeds, and (iv) the loan forgiveness calculations.


In the event you have follow up questions about the Interim Final Rules or have other questions about the Paycheck Protection Program or other COVID-19 related relief, please contact your Nyemaster Goode attorney


Visit Nyemaster Goode's Paycheck Protection Program Resource Center