ALERT – Major Developments in the Paycheck Protection Program

There were numerous developments in the management and administration of the Paycheck Protection Program. The Treasury Department issued a series of new, and controversial, regulations detailing the steps necessary to qualify for loan forgiveness. and the U.S. House of Representatives passed a sweeping bill that would make major modifications to the PPP program.  So, if you have a PPP loan, make sure to read this article from start to finish.

Let’s start with the Treasury regs governing loan forgiveness.

If you are a business owner hoping to utilize a reasonable, straight-forward PPP loan forgiveness process, you are going to be disappointed. The new regs regarding PPP loan forgiveness have been described as harsh, overly complicated, and byzantine. Here are some of the key takeaways:

1. The SBA retains authority to review any PPP loan at any time they desire

The new regs state that the SBA maintains the authority to undertake a review, at any time, of the details of any PPP loan that was disbursed to a borrower.

2. It could take months to actually get your PPP loan forgiven

Once you file the forgiveness application with your bank, it will have 60 days to review it and let you know the amount of forgiveness. The bank will then notify the SBA of the amount of forgiveness and the SBA will have 90 days to approve the bank’s decision.

The SBA can request more information from the lender or the borrower directly and then will approve the amount in whole or in part. If the SBA determines a portion or all of the loan did not meet the guidelines for eligibility or forgiveness, it can request repayment of the loan or “pursue other available remedies.” The guidelines do not explain what these other remedies might be. Borrowers do have the right to appeal decisions rejecting forgiveness to the SBA.

3. Keep your PPP loan records

It is important to note the SBA now requires borrowers to keep all files and paperwork on PPP loans for six years. The regulation states:

“As noted on the Loan Forgiveness Application Form, the borrower must retain PPP documentation in its files for six years after the date the loan is forgiven or repaid in full, and permit authorized representatives of SBA, including representatives of its Office of Inspector General, to access such files upon request from the time of application.”

While not expressly stated, presumably the SBA may have six years to audit loans and potentially take action.

4. The burden falls on the borrower to calculate the amount of eligible forgiveness

The new regs make clear that the borrower has the burden of calculating the amount from your PPP loan that is eligible for forgiveness. Once you complete your calculation, the lender has the responsibility to make a “good faith” review of your forgiveness application.

5. Have Your Calculator Handy

Many borrowers may be surprised to discover that the amount of their loan eligible for forgiveness will be directly linked to having the same number of full-time employees as you did when you calculated your loan amount. In other words, the amount you can have forgiven will be reduced if there was a reduction in full-time employees.

Here is where a calculator (or an accountant) would come in handy. Traditionally, an employee who works 32 hours per week is considered to be a full-time employee. However, under the PPP program, a full-time-equivalent employee is required to work 40 hours per week. As a result, if you have an employee who is, let’s say, working 36 hours per week, they are not full-time and your PPP loan may need to be reduced as a result.

The SBA offers business owners two ways to calculate the amount of your loan eligible for forgiveness. You can treat a 40-hour-per-week employee as equaling 1 while calculating part-time employees as 0.5.

The other option is to calculate the actual number of hours worked by 40. So, for example, if you have an employee working 30 hours per week, they would count as 0.75, according to This means you will need to add up your “part-time” employees to determine by what percentage your workforce was reduced (if any) and be ready to have your loan forgiveness amount reduced by that percentage.

Key Takeaway – Paycheck Protection Program May Become Known as the Painful and Problematic Program

The SBA’s new regulations seem to be designed to make loan forgiveness as difficult and stress-inducing as possible for business owners. You should probably hire a lawyer and accountant just to make sure your loan forgiveness calculation was accurate. It seems like the SBA does not understand that we are in the midst of a historic pandemic and business owners are having a difficult time simply staying afloat and do not have time to manage the tremendous administrative burden inherent in these new regulations.

If you have questions or need assistance, contact InSight Law. We stand ready to help.