WASHINGTON—The Small Business Administration (SBA) has released an interim final rule (IFR) to make revisions that are consistent with the recently enacted Paycheck Protection Program (PPP) Flexibility Act (H.R. 7010).
In addition, the SBA updated both the borrower application and the lender application to reflect changes made by the law, NAFCU reported.
The revised IFR makes changes to the deferral period and states that if a borrower submits a loan forgiveness application within 10 months after the end of the forgiveness period, the borrower will not have to make any payments of principal or interest on the loan before the date that the SBA remits the amount of forgiveness.
On forgiveness, the revised IFR amends the proportion of expenses that previously had to be spent on payroll in order for a PPP loan to be forgiven, according to the SBA. As a result, a PPP loan may be forgiven in full or in part and to receive full forgiveness at least 60% of the funds must be used for payroll with no more than 40% of the funds being used for non-payroll costs.
Loan Term Changed
The updated borrower application also reflects the PPP Flexibility Act and makes some changes to borrower certifications. Borrowers must provide documentation verifying payroll for 24 weeks and certify that they understand that not more than 40% of the forgiven amount will be used for non-payroll costs, the SBA said.
In the updated lender application, the loan term has been changed to five years. A recent operations update from the SBA indicated that the new five-year maturity will be automatically reflected in E-Tran. For loans approved before the law's enactment, the agency noted lenders and borrowers may mutually agree to an extension of maturity from the original two years to five years, NAFCU said, adding the SBA will be issuing revisions to the rules already published on loan forgiveness to reflect PPP Flexibility Act changes.