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Relief Loan Guidance Addresses Major Concern for Borrowers (1)

June 17, 2020, 4:03 PMUpdated: June 17, 2020, 9:26 PM

New regulations issued Wednesday by the U.S. government ease concerns for small businesses trying to use pandemic loans and have them fully forgiven, but some timing issues remain to be addressed.

Treasury and the Small Business Administration released two versions of the Paycheck Protection Program (PPP) forgiveness form, including a shorter, simplified version that requires fewer calculations and less documentation. The forms reflect congressional changes to the loan program, including an extended 24-week covered period.

Before the rules were released, it was unclear if a business that was approved to use a loan in eight weeks would have to wait for the end of the 24-week period before it could apply for forgiveness. That raised concerns for some business owners who had been carefully trying to meet the requirements of the program.

Charles Crain, director of tax and domestic economic policy at the National Association of Manufacturers, said the regulations and forms “make perfectly clear” that borrowers who received their PPP loans before June 5 can elect an eight-week period to use the funds.

The PPP, created in the CARES Act (Public Law 116-136), has facilitated hundreds of billions of dollars in government-backed, forgivable loans intended to help businesses stay afloat amid the pandemic-triggered recession and mandated business closures.

Borrowers must meet certain conditions to take advantage of the shorter form, including that their business activity declined as a direct result of Covid-19 restrictions and that they didn’t reduce staff pay by more than 25%.

Along with the forms, the agencies issued an updated interim final rule reflecting compensation caps for both the 8-week covered period under an earlier version of the program and the new, extended period.

Last week, Treasury and the SBA issued rule updates to reflect the recently enacted law (Public Law 116-142) that offers more flexibility to loan recipients, and eased restrictions for applicants with criminal histories.

Clarity Still Needed

Holly Wade, director of research and policy analysis at the National Federation of Independent Business, said that while the new rule and forms provide much-needed clarity, there are some unanswered questions remaining.

Wade said that it was unclear if businesses that use the loan in the period between eight and 24 weeks will be able to apply for forgiveness the moment the funds are exhausted.

For example, if a business elects the 24-week period to use the loan, but uses the money in 12 weeks, it may have to maintain the numbers of employees and pay, as well as wait another 12 weeks for forgiveness, Wade said.

“For many small business owners, to make them wait the 24-week period and maintain those full-time equivalent levels throughout that time-frame if they’ve exhausted their loan, that is unworkable,” Wade said.

Treasury Secretary Steven Mnuchin told a Senate panel last week that his department would allow that flexibility, but that isn’t reflected in the rule, NAM’s Crain said.

Wade said she expected clarity to come from the government, but until it does, businesses will be left waiting.

“When going to apply for forgiveness, when there’s still unanswered questions,” she said. “That’s not a great place for an owner to be, especially with all the other stresses of operating in the economic crisis that we’re living in.”

(Updates with additional information throughout.)

To contact the reporters on this story: Amanda Iacone in Washington at; David Hood at

To contact the editors responsible for this story: Jeff Harrington at; David Jolly at