On July 4, President Trump signed an extension to the Payroll Protection Program allowing borrowers to apply for funds through August 8 (formerly June 30) of this year. At the time the extension was signed, approximately $130 billion in funds remained. There is still news of another relief package being put together by Congress sometime this month.

FTE Safe Harbor Ambiguity

Some questions remain about the program. The biggest of which relates to the FTE safe harbor. If borrowers apply for forgiveness before the end of the extended 24-week period and meet the FTE reduction safe harbor on the date of application, will they still need to qualify for the safe harbor on December 31? The statute says the safe harbor for the FTE reduction must be passed on or before December 31 and the SBA application seems to suggest that you can include the calculation of FTEs on the date of the application with no representation that the number will be the same on December 31. We believe at this point, the interpretation is that a borrower may apply early and fall under the safe harbor as of the date of the application. However, the SBA has continuously redefined rules and made changes to its program so a borrower certainly has a risk that rules could change and the safe harbor for FTE reductions would still need to be met not only on the date of the application for forgiveness but also on December 31 of this year.

The Big Picture

Organizations that have not yet applied for PPP funds will find the extension beneficial, but if the organization has hesitated to apply because of the ambiguity, they will find no comfort in this extension. We continue to hope that the SBA will clarify the rules and provide guidelines that offer certainty to borrowers.