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Treasury Clarifies Rules on Paycheck Protection Loan Forgiveness

May 26, 2020, 4:09 PM

Treasury and the Small Business Administration have issued new guidance on pandemic loan forgiveness eligibility, clarifying the definition of full-time equivalent workers and explaining the impact of staffing reductions.

In a pair of interim final rules, released over the long Memorial Day weekend, Treasury addresses some lingering questions surrounding the Paycheck Protection Program, including how to calculate reductions and exemptions that help to determine how much of the loans can be forgiven. The documents also sketch out the lender review process for forgiveness applications.

Small business owners are anxious to know how much of their loans are eligible for forgiveness, having been frustrated by weeks of shifting guidance. Now, even as they struggle to stay afloat amid government-ordered shutdowns and restrictions, they are looking at the next hurdle: How the SBA and lenders will address forgiveness applications.

More than 4.4 million loans totaling over $511 billion as of May 23 have been approved by the SBA since the program started in April.

  • Treasury also provided examples to help small businesses calculate wage reductions and whether they had met a safe harbor requirement, which would exempt them from a lower covered amount. It clarifies instructions released May 15 along with a forgiveness application form. Staffing reductions would result in a proportional reduction in the loan amount eligible for forgiveness. The rules also discuss how to treat laid-off staffers who decline to return to work.
  • Treasury defines full-time equivalent employees as those who work 40 hours or more on average each week. It provides additional examples to help owners calculate and report staffing.
  • Lenders will have 60 days to review forgiveness applications and inform SBA whether or not the requirements have been met. However, the SBA may still review those lender decisions.

To contact the reporter on this story: Amanda Iacone in Washington at

To contact the editors responsible for this story: Jeff Harrington at; Yuri Nagano at