The Paycheck Protection Program (“PPP”) authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. Note, however, that the SBA specifically advises that any employee who rejects such offer of re-employment may forfeit eligibility for continued unemployment compensation. There will be further guidance provided by the SBA on forgiveness, including the application of this rule. Borrowers should carefully document any such offers and rejections to evidence compliance. To be a good faith offer of re-employment, a borrower must offer the employee the same salary or wages and hours that the employee previously maintained. Update as of May 4, 2020: On May 3, as part of its continuing set of frequently asked questions (which can be found here), the SBA stated that if a borrower makes a good faith, written offer of re-employment to any individual that was laid-off and such individual rejects such offer, that individual will be excluded from the forgiveness reduction calculation. As a result, we have prepared an update to this advisory and a new calculator. Update as of May 18, 2020: On May 15, the SBA released its PPP forgiveness application. Once complete, we will upload the new calculator to our website. We anticipate that this will be signed into law shortly and are preparing an advisory on these changes, along with modifying the calculator. Update as of June 4, 2020: On June 3, the Senate unanimously approved a bill adopted last week by the House of Representatives which modifies a number of aspects of the PPP, including the forgiveness process and calculations. As of June 5, there remains around $150 billion available. You should fully understand the restrictions and limitations in the program and confirm that you qualify as a borrower and can document a need for this funding. If you have not applied for a PPP loan yet, your window is closing on participation in the program. Also notable in this statement is a reiteration that Jwill remain the last day on which PPP loan applications may be approved. It is now anticipated that borrowers that do not spend at least 60% of their loan proceeds on payroll expenses will have reduced forgiveness but will not lose forgiveness entirely. As anticipated, among these changes include a revision to the 60/40 “cliff” analysis with respect to use of proceeds. Update as of June 10, 2020: Based on a joint statement by the Secretary of the Treasury and the SBA Administrator, it is expected that forthcoming regulations will be adopted regarding some of the changes made to the PPP through the PPP Flexibility Act. As a result, we have updated our Loan Forgiveness Calculator. Update – June 19, 2020: On June 16, the SBA released two new forms of forgiveness application, which we discuss in more detail in our alert on June 18, 2020.
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