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CARES Act: SBA Issues Updated FAQs on Paycheck Protection Program (PPP) and PPP Loan Forgiveness to Account for EIDL Advances
Practical Law Legal Update w-027-0085 (Approx. 4 pages)
CARES Act: SBA Issues Updated FAQs on Paycheck Protection Program (PPP) and PPP Loan Forgiveness to Account for EIDL Advances
by Practical Law Finance
| Published on 13 Aug 2020 • USA (National/Federal) |
The Small Business Administration (SBA) issued updated Frequently Asked Questions (FAQs) to provide guidance for borrowers and lenders on Paycheck Protection Program (PPP) loans. The SBA also issued updated Frequently Asked Questions on PPP Loan Forgiveness (EIDL FAQs) with guidance on how to treat Economic Injury Disaster Loan (EIDL) advances when determining PPP loan forgiveness.
On March 27, 2020, the US government passed the CARES Act in response to the COVID-19 crisis. Under the CARES Act, the Small Business Administration (SBA) offered loans under the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) program. For more information on the PPP and EIDL programs, see Practice Note, Road Map to the Coronavirus Aid, Relief, and Economic Security Act (CARES Act): Paycheck Protection Program (PPP) and Economic Injury Disaster Loan Program.
On August 11, 2020, the SBA issued updated PPP Frequently Asked Questions (FAQs) to clarify that:
- The payment or nonpayment of fees of an agent or other third party is not material to the SBA's guarantee of a PPP loan or to the SBA's payment of fees to PPP lenders.
- Payments required for the provision of group health care benefits, including insurance premiums, also include vision and dental benefits.
On August 11, 2020, the SBA issued updated Frequently Asked Questions on PPP Loan Forgiveness (EIDL FAQs) with guidance on how to treat EIDL advances when determining PPP loan forgiveness.
EIDL FAQ Coverage
The EIDL FAQs provided the following guidance:
Deduction of EIDL Advance Amount
The SBA will reduce the borrower's PPP loan forgiveness amount by the amount of any EIDL advance. The SBA will deduct this amount from the loan forgiveness amount that it remits to the PPP lender. The lender can confirm the deducted amount of the EIDL advance by reviewing the borrower's EIDL advance information in the PPP Forgiveness Platform.
Partial Loan Forgiveness
If a PPP loan is not forgiven in full (including due to a reduction in the forgiveness amount for an EIDL advance):
- The borrower must pay any remaining balance due on the PPP loan by the maturity date of the PPP loan.
- The PPP lender must notify the borrower of the loan forgiveness amount and the date the first loan payment is due.
- The PPP lender must continue to service the loan.
If a borrower is determined to have been ineligible for a PPP loan for any reason, the SBA may seek repayment of the outstanding PPP loan balance or pursue other available remedies.
EIDL Advance in Excess of PPP Loan
A borrower that received an EIDL advance in excess of the amount of its PPP loan will not receive any forgiveness on the PPP loan, because the amount of an EIDL advance is deducted from the PPP loan forgiveness amount.
In this case, the borrower and PPP lender must follow the same steps listed under Partial Loan Forgiveness.