The Small Business Administration says it’s loosening payroll restrictions to allow partial loan forgiveness under PPP small business aid program

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FILE PHOTO – U.S. treasurer Jovita Carranza speaks during her swearing in ceremony at the Treasury Department building in Washington, U.S Reuters
  • The SBA amended its rules to allow for partial loan forgiveness even if the majority of a government-backed loan wasn’t directed toward payrolls.
  • The SBA now says 60% of the forgiven loan amount should go toward worker paychecks.
  • “There’s no question in my mind the increase in jobs was a direct result of the PPP and reopening the economy,” Treasury Secretary Steven Mnuchin told CNBC on Thursday.
  • Visit Business Insider’s homepage for more stories.

The Small Business Administration amended its rules governing the Paycheck Protection Program to allow small businesses to qualify for partial loan forgiveness even if 60% of the government-financed loan wasn’t directed toward loan forgiveness.

The SBA issued the new rule in the early hours of Thursday morning. It’s set to make partial loan forgiveness available to vastly more small businesses that don’t spend the majority of their cash on workers’ paychecks.

Instead, 60% of the amount eventually forgiven should go toward payroll, the SBA said.

The SBA offered an example: “If a borrower receives a $US100,000 PPP loan, and during the covered period the borrower spends $US54,000 (or 54 per cent) of its loan on payroll costs, then because the borrower used less than 60 per cent of its loan on payroll costs, the maximum amount of loan forgiveness the borrower may receive is $US90,000.”

PPP was implemented back in March under the CARES Act as Congress rushed to stave off an economic disaster and massive layoffs of workers. The $US660 billion federal program was designed to allow small businesses to qualify for loans that could be fully forgiven if a substantial chunk of the loan went toward employing workers.

But many businesses criticised the restrictions as onerous and faulted rule changes that triggered confusion. Other critics blasted the program when large publicly traded companies were found to be drawing funds from it.

Around $US130 billion in PPP funds still sits unused, The New York Times reported. Recently, President Donald Trump signed a bipartisan law relaxing the threshold of a loan going toward worker payrolls to 60% to qualify for loan forgiveness. The law also lengthened the amount of time within which the loans needed to be spent to 24 weeks from eight weeks.


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The latest jobs report on Friday surprised economists as the unemployment rate dropped to 13.3%, while many expected it to surge near 20%. Experts and the Trump administration said the program helped salvage jobs to a greater extent that previously thought.

“There’s no question in my mind the increase in jobs was a direct result of the PPP and reopening the economy,” Treasury Secretary Steven Mnuchin told CNBC on Thursday.

During a congressional hearing on Wednesday, Mnuchin told lawmakers that further changes to the program were imminent, such as allowing more business owners with a criminal record to tap into PPP.