By: Scott Borsack
In the wee hours of the morning of June 11, 2020 the SBA released interim final guidance revising the first guidance that they issued following the enactment of the CARES Act. This was the first of what likely will be several revisions to guidance that resulted from the passage of the Paycheck Protection Flexibility Act. In this revision of guidance the SBA provided that the new 60% spending requirement for payroll expenses is not a threshold for forgiveness and is not based upon the loan amount, but rather on the amount of the loan proceeds spent. Forgiveness will be proportionate and will be limited to 40% of the amount spent being non-payroll expenses.
The Flexibility Act extended the period of time in which a borrower has to spend proceeds to secure forgiveness from 8 weeks following loan origination to the earlier of December 31, 2020 or 24 weeks from loan origination. The guidance did not address how a loan of 10 weeks of payroll costs can allow a borrower to satisfy the FTE and salary reduction tests over the course of the same 24 week period. Hopefully this will be addressed at another time.
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Scott Borsack is a partner with Szaferman Lakind and chair of the Business Department. To contact Scott please email him at firstname.lastname@example.org or call 609.275.0400.