Interim Final Rule – PPP as Amended by the Economic Aid Act

Schneider Downs continues to track the evolving landscape of federal financial programs offered in the wake of the business disruption caused by the coronavirus crisis.  On December 21, 2020, the Consolidated Appropriations Act of 2021 (the Act) was passed by both houses of Congress, which included the Economic Aid to Hard-Hit Businesses, Nonprofits, and Venues Act (the Economic Aid Act). On January 6, 2021, the Small Business Administration (SBA) issued an Interim Final Rule (IFR) regarding the Act’s impact on the Paycheck Protection Program (PPP).  

What is the Purpose of this IFR?

  1. To summarize changes to the PPP under the Economic Aid Act.

  2. To consolidate prior guidance into one document.

The IFR is intended to govern new PPP loans made under the Economic Aid Act and applications for forgiveness on existing PPP loans where the loan forgiveness has not been remitted.  However, the IFR clearly states that it is not intended to substantively alter or affect PPP rules that were not amended by the Economic Aid Act.  

Additionally, rules related to the second round of PPP (PPP2) are addressed in a separate IFR and the SBA intends to issue a consolidated rule governing all aspects of loan forgiveness and the loan review process.

While the IFR does not contain significant new updates that were not in the Economic Aid Act, the main benefit of the IFR is the consolidation of all guidance in one place.  Borrowers and their advisors can use this as their “one-stop shop” to PPP guidance without having to reference nearly 25 other IFRs issued by the SBA and Treasury.

What are the Big Changes?

As mentioned above, in reality, there is not much new in the IFR that was not addressed in the Economic Aid Act and summarized in our December 23, 2020, OTO article Revisions to the Paycheck Protection Program.

However, there was one change of significance between the Economic Aid Act and the IFR.   For PPP loans that were made in 2020, most borrowers used 2019 payroll costs.  The IFR allows first draw PPP borrowers to use either 2019 or 2020 payroll amounts to calculate their maximum loan amount.  The Economic Aid Act did not change the original guidance for borrowers who were not farmers and ranchers.  Therefore, this would have resulted in new first draw PPP borrowers who were newly eligible being required to use 2020 payroll to determine their maximum loan amount.  

The Act also required farmers and ranchers to calculate their maximum loan amount using 2019 payroll costs. 

The SBA made these adjustments in order to allow all borrowers to obtain funding on terms consistent with other new and existing PPP borrowers.  Additionally, it avoids borrowers having their loan amount reduced if 2020 operations were negatively impacted.

Applying for PPP Loans

The SBA also announced that the PPP portal for accepting applications will officially reopen on Monday, January 11, but with an interesting timeline.  

  • January 11 – Accept PPP1 loan applications from businesses who have not received a PPP loan.  Further, it will only be accepting applications from lenders considered “community financial institutions.”

  • January 13 – Accept PPP2 loan applications, but only from lenders considered “community financial institutions.”

This appears to be a response to some earlier criticism that certain smaller businesses and lenders initially had difficulty getting PPP loans.  The PPP is supposed to open to other lenders some time shortly after.

If you need more information or assistance regarding the PPP, visit our dedicated PPP Loan website, reach out to any of your contacts at Schneider Downs or contact Joel Rosenthal at [email protected].

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

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