SBA softens PPP eligibility requirement for non-dishonesty felonies and issues a revised application
June 15, 2020
By: Mark A. Mangano
The Small Business Administration (SBA) has softened the qualified eligibility limits for borrowers with owners with charges or convictions of a felony. This change in eligibility requirements accompanies the issuance of a revised PPP application that complies with the Paycheck Protection Program Flexibility Act (Act).
On Friday, June 12, 2020, SBA published its eighteenth interim final rule interpreting the Paycheck Protection Program (PPP): “Business Loan Program Temporary Changes; Paycheck Protection Program-Additional Revisions to First Interim Final Rule” (IFR).1 The SBA also released the “Paycheck Protection Program Borrower Application Form Revised June 12, 2020” (Revised Application).2
The IFR modifies the SBA’s First Interim Rule pronouncement that borrowers were ineligible if, “An owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony within the last five years”. The IFR confirms the five-year look back period for felonies involving fraud, bribery, embezzlement, or false statement on a loan application or an application for federal assistance. The IFR limits the look back period for all other felonies to one year.
The Revised Application integrates the questions related to the revised felony eligibility requirements provided in the IFR. The Revised Application also incorporates the modified certification included in the June 11, 2020 revision related to the borrower’s understanding that forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, covered utilities and, and not more than 40% of the forgiven amount may be for non-payroll costs. The certification reflects the more accommodative requirements provided in the Act.