New PPP payroll threshold not a cliff

The Treasury Department and Small Business Administration clarified that Paycheck Protection Program borrowers will remain eligible for partial loan forgiveness under the 60 percent payroll requirement contained in the new PPP reform law.

The Paycheck Protection Program Flexibility Act of 2020 lowers the amount that must be spent on payroll costs from 75 percent to 60 percent. While the legislative language suggested that there would be no forgiveness if payroll is less than 60 percent, a joint statement from Treasury and SBA issued Monday clarified that partial forgiveness will remain available.

The agencies noted that 60 percent of the forgiveness amount—not the total loan amount—must be devoted to payroll.

ICBA has updated its summary of the PPP reform law for community banks to share with their small-business borrowers. Among its other provisions, the law extends from eight to 24 weeks the amount of time borrowers have to spend PPP funds while remaining eligible for forgiveness.

ICBA strongly advocated additional reforms, such as allowing a forgiveness presumption of compliance for loans of $1 million or less, and will continue working with policymakers on PPP flexibilities.