Interim Final Rule — SBA PPP

Record facts

Summary

An interim final rule of the U.S. Small Business Administration and the Department of the Treasury, dated January 19, 2021, on Paycheck Protection Program loan forgiveness requirements and loan review procedures as amended by the Economic Aid Act, under 13 CFR Part 120, Docket Number SBA-2021-0006. The copy is pre-publication text, with the effective date and comment deadline left as bracketed placeholders. The rule consolidates earlier interim final rules on loan forgiveness and on SBA loan review procedures and incorporates the Economic Aid Act, Pub. L. 116-260, enacted December 27, 2020, which reauthorized PPP lending through March 31, 2021. It identifies six provisions exercised by Treasury, including de minimis exemptions for PPP loans of $50,000 or less, and addresses SBA review of loans of $150,000 or less. It is signed by Administrator Jovita Carranza and Michael Faulkender.

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Full text

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SMALL BUSINESS ADMINISTRATION 
13 CFR Part 120  
[Docket Number SBA-2021-0006] 
RIN 3245-AH65 
DEPARTMENT OF THE TREASURY 
RIN 1505-AC75 
Business Loan Program Temporary Changes; Paycheck Protection Program – Loan 
Forgiveness Requirements and Loan Review Procedures as Amended by Economic Aid Act 
AGENCY:  U.S. Small Business Administration; Department of the Treasury. 
ACTION:  Interim final rule. 
SUMMARY:  This interim final rule implements changes related to the forgiveness and review 
of loans made under the Paycheck Protection Program (PPP), which was originally established 
under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) to provide 
economic relief to small businesses nationwide adversely impacted by the Coronavirus Disease 
2019 (COVID-19).  On December 27, 2020, the Economic Aid to Hard-Hit Small Businesses, 
Nonprofits, and Venues Act (Economic Aid Act) (Pub. L. 116-260) was enacted, extending the 
authority to make PPP loans through March 31, 2021, revising certain PPP requirements, and 
permitting second draw PPP loans.  This interim final rule consolidates prior rules related to 
forgiveness and reviews of PPP loans and incorporates changes made by the Economic Aid Act, 
including with respect to forgiveness of second draw PPP loans.   
DATES:  Effective date: Unless otherwise specified in the Economic Aid Act, the provisions of 
this interim final rule are effective [INSERT DATE OF FILING AT THE OFFICE OF THE 
FEDERAL REGISTER].  

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Applicability date: This interim final rule applies to Paycheck Protection Programs loans for 
which a loan forgiveness payment had not been remitted by SBA as of December 27, 2020.  
Parts IV.6.c., IV.7 and V of this interim final rule, Paycheck Protection Program SBA Loan 
Review Procedures and Related Borrower and Lender Responsibilities, apply to all Paycheck 
Protection Program loans. 
Comment date:  Comments must be received on or before [INSERT DATE 30 DAYS AFTER 
DATE OF PUBLICATION IN THE FEDERAL REGISTER]. 
ADDRESSES: You may submit comments, identified by number SBA-2021-0006 through the 
Federal eRulemaking Portal: http://www.regulations.gov.  Follow the instructions for submitting 
comments.   
SBA will post all comments on www.regulations.gov.  If you wish to submit confidential 
business information (CBI) as defined in the User Notice at www.regulations.gov, please send an 
email to ppp-ifr@sba.gov.  All other comments must be submitted through the Federal 
eRulemaking Portal described above.  Highlight the information that you consider to be CBI and 
explain why you believe SBA should hold this information as confidential.  SBA will review the 
information and make the final determination whether it will publish the information. 
FOR FURTHER INFORMATION CONTACT:  A Call Center Representative at 833-572-0502, 
or the local SBA Field Office; the list of offices can be found at https://www.sba.gov/tools/local-
assistance/districtoffices.  
SUPPLEMENTARY INFORMATION: 
I. 
Background Information 
On March 13, 2020, President Trump declared the ongoing Coronavirus Disease 2019 
(COVID-19) pandemic of sufficient severity and magnitude to warrant an emergency declaration 

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for all States, territories, and the District of Columbia.  With the COVID-19 emergency, many 
small businesses nationwide continue to experience economic hardship as a direct result of the 
Federal, State, and local public health measures that continue to be taken to minimize the 
public’s exposure to the virus.  In addition, based on the advice of public health officials, other 
voluntary measures continue to be observed, resulting in a decrease in economic activity as the 
public avoids malls, retail stores, and other businesses. 
On March 27, 2020, the President signed the Coronavirus Aid, Relief, and Economic 
Security Act (the CARES Act) (Pub. L. 116-136) to provide emergency assistance and health 
care response for individuals, families, and businesses affected by the coronavirus pandemic.  
The Small Business Administration (SBA) received funding and authority through the CARES 
Act to modify existing loan programs and establish a new loan program to assist small 
businesses nationwide adversely impacted by the COVID-19 emergency.   
Section 1102 of the CARES Act temporarily permitted SBA to guarantee 100 percent of 7(a) 
loans under a new program titled the “Paycheck Protection Program,” pursuant to section 
7(a)(36) of the Small Business Act (15 U.S.C. 636(a)(36)).  Section 1106 of the CARES Act 
provided for forgiveness of up to the full principal amount of qualifying loans guaranteed under 
the Paycheck Protection Program (PPP).  On April 24, 2020, the President signed the Paycheck 
Protection Program and Health Care Enhancement Act (Pub. L. 116-139), which provided 
additional funding and authority for the Paycheck Protection Program.  
 On June 5, 2020, the President signed the Paycheck Protection Program Flexibility Act of 
2020 (Flexibility Act) (Pub. L. 116-142), which changed provisions of the PPP relating to the 
maturity of PPP loans, the deferral of PPP loan payments, and the forgiveness of PPP loans.  On 

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July 4, 2020, Public Law 116-147 extended the authority for SBA to guarantee PPP loans to 
August 8, 2020.   
On December 27, 2020, the President signed the Economic Aid to Hard-Hit Small 
Businesses, Nonprofits and Venues Act (Economic Aid Act) (Pub. L. 116-260), which 
reauthorizes lending under the PPP through March 31, 2021, and among other things, modifies 
the PPP, including provisions relating to forgiveness of PPP loans.  The Economic Aid Act 
added a new temporary section 7(a)(37) to the Small Business Act, which authorizes SBA to 
guarantee additional PPP loans to eligible borrowers under generally the same terms and 
conditions available under section 7(a)(36) of the Small Business Act through March 31, 2021.  
The Economic Aid Act also redesignates section 1106 of the CARES Act as section 7A and 
transfers that section to the Small Business Act, to appear after section 7 of the Small Business 
Act.1      
As described below, this interim final rule (1) provides borrowers and lenders with guidance 
on requirements governing forgiveness of PPP loans, and (2) informs borrowers and lenders of 
SBA’s process for reviewing loan applications and loan forgiveness applications.  SBA is 
incorporating and restating the prior interim final rules relating to loan forgiveness and loan 
reviews and making revisions to conform these prior interim final rules to the amendments made 
by the Economic Aid Act, including for PPP loans made under section 7(a)(37) of the Small 
Business Act.  The prior interim final rules relating to loan forgiveness and loan reviews that are 
incorporated in this interim final rule are: the first interim final rule on loan forgiveness (85 FR 
33004) (June 1, 2020); the first interim final rule on SBA loan review procedures and related 
borrower and lender responsibilities (85 FR 33010) (June 1, 2020); the interim final rule 
 
1 Because section 1106 of the CARES Act is now codified as section 7A of the Small Business Act, any reference to 
section 1106 of the CARES Act in the rules that are being restated herein will refer to section 7A. 

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incorporating Flexibility Act Amendments (85 FR 38304) (June 26, 2020); the interim final rule 
on Treatment of Owners and Forgiveness of Certain Nonpayroll Costs (85 FR 52881) (August 
27, 2020); and the interim final rule on Additional Revisions to Loan Forgiveness and Loan 
Review Procedures Interim Final Rules (85 FR 66214) (October 19, 2020).  The rule also 
incorporates the forgiveness portions of the interim final rules regarding individuals with self-
employment income (85 FR 21747 (April 20, 2020) and 85 FR 36997 (June 19, 2020)) and 
fishing boat owners (85 FR 39066) (June 30, 2020). 
This rule should be interpreted consistently with the sets of Frequently Asked Questions 
(FAQs) regarding the PPP that are posted on SBA’s and the Department of the Treasury’s 
(Treasury) websites, the consolidated interim final rule implementing updates to the Paycheck 
Protection Program (86 FR 3692 (January 14, 2021))  and the interim final rule on second draw 
PPP loans (86 FR 3712 (January 14, 2021)); however, the Economic Aid Act overrides any 
conflicting guidance in the FAQs, and SBA will be revising the FAQs to fully conform to the 
Economic Aid Act as quickly as feasible. 
Most of this document restates existing regulatory provisions to provide PPP lenders and new 
and existing PPP borrowers a single regulation to consult on loan forgiveness and loan review 
requirements and processes.  To enhance the readability of this document, SBA has not 
reproduced the policy and legal justifications for existing regulatory provisions restated here, 
except to the extent that those justifications may be helpful to the borrower or lender.  However, 
those justifications from the original interim final rules are incorporated by reference here. 
Six provisions of this interim final rule are an exercise of rulemaking authority by Treasury 
either jointly with SBA or by Treasury alone:  (1) the additional reference period option provided 
for seasonal employers, (2) the de minimis exemption provided with respect to certain offers of 

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rehire, (3) the de minimis exemption from the full-time equivalent employee reduction penalty 
when an employee is, for example, fired for cause, (4) the de minimis exemption from the full-
time equivalent employee reduction penalty when the borrower eliminates reductions by 
December 31, 2020 or, for a PPP loan made after December 27, 2020, the last day of the loan’s 
covered period, (5) the de minimis exemption from the full-time equivalent (FTE) employee 
reduction penalty for certain PPP loans of $50,000 or less, and (6) the de minimis exemption 
from the employee salary and wages reduction penalty for certain PPP loans of $50,000 or less.  
Otherwise, all provisions in this rule are an exercise of rulemaking authority by SBA alone. 
II. 
Comments and Immediate Effective Date 
This interim final rule is being issued without advance notice and public comment because 
section 303 of the Economic Aid Act authorizes SBA to issue regulations to implement the 
Economic Aid Act without regard to notice requirements.  In addition, this rule is being issued to 
allow for immediate implementation of this program.  The intent of both the CARES Act and the 
Economic Aid Act is that SBA provides relief to America’s small businesses expeditiously.  The 
Economic Aid Act provided that several of the changes relating to loan forgiveness are effective 
as if included in the CARES Act and apply to any loan made pursuant to section 7(a)(36) of the 
Small Business Act before, on, or after December 27, 2020, including forgiveness of such a loan.  
Accordingly, loans that were made in 2020 but for which SBA has not yet remitted forgiveness 
to the lender will be forgiven based on changes made in the Economic Aid Act, as implemented 
in this interim final rule.  Given the urgent need to provide borrowers that are eligible for loan 
forgiveness with timely relief, the Administrator in consultation with the Secretary has 
determined that it is impractical and not in the public interest to provide a 30-day delayed 
effective date.  An immediate effective date will allow SBA to continue remitting forgiveness 

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payments to lenders without disruption and in accordance with the amendments made by the 
Economic Aid Act.  This good cause justification also supports waiver of the 60-day delayed 
effective date for major rules under the Congressional Review Act at 5 U.S.C. 808(2).  Although 
this interim final rule is effective immediately, comments are solicited from interested members 
of the public on all aspects of the interim final rule. 
These comments must be submitted on or before [INSERT DATE 30 DAYS AFTER DATE 
OF PUBLICATION IN THE FEDERAL REGISTER].  SBA will consider these comments and 
the need for making any revisions as a result of these comments. 
III. 
Paycheck Protection Program – Loan Forgiveness and Loan Review Procedures as 
Amended by Economic Aid Act 
Overview  
The CARES Act was enacted to provide immediate assistance to individuals, families, and 
organizations affected by the COVID-19 emergency.  Among the provisions contained in the 
CARES Act are provisions authorizing SBA to temporarily guarantee loans under the Paycheck 
Protection Program (PPP).  Loans under the PPP will be 100 percent guaranteed by SBA, and the 
full principal amount of the loans may qualify for loan forgiveness.   
Under the CARES Act, as amended by the Economic Aid Act, SBA is authorized to 
guarantee loans under the PPP, a new temporary 7(a) program, through March 31, 2021.  PPP 
loans made under section 7(a)(36) of the Small Business Act may be referred to as “First Draw 
PPP Loans,” and PPP loans made under section 7(a)(37) of the Small Business Act may be 
referred to as “Second Draw PPP Loans.”  (Any reference to “PPP loans” or “PPP loan” herein 
refers to both First Draw PPP Loans and Second Draw PPP Loans.)  The intent of the CARES 
Act and the Economic Aid Act is that SBA provide relief to America’s small businesses 

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expeditiously, which is expressed in the CARES Act by giving all lenders delegated authority 
and streamlining the requirements of the regular 7(a) loan program.  This intent is also expressed 
in the Economic Aid Act through the statutory deadlines requiring that the Administrator issue 
certain guidance and regulations within 10 days of enactment.2    
The Small Business Act authorizes the Administrator to conduct investigations to determine 
whether a recipient or participant in any assistance under a 7(a) program, including the PPP, is 
ineligible for a loan, or has violated section 7(a), or any rule, regulation or order issued 
thereunder.3  Additionally, under section 7(a), the Administrator is empowered to make loans in 
cooperation with lenders through agreements to participate on a deferred (guaranteed) basis.4  
Further, the Administrator may make such rules and regulations as deemed necessary and take 
any and all actions determined to be necessary or desirable with respect to 7(a) loans.5  Pursuant 
to these provisions of the Small Business Act, SBA has issued regulations establishing the 
standards by which it will investigate whether a loan met program requirements and the 
circumstances under which SBA will be released from liability on a guarantee for such a loan.6  
Additionally, section 7A(l)(1)(E) of the Small Business Act expressly provides that SBA may 
review and audit PPP loans of $150,000 or less and access any records the borrower is required 
to retain. 
In light of the structure of the PPP program established by the CARES Act and the PPP 
Interim Final Rules, in which loans and loan forgiveness are provided based on the borrower’s 
certifications and documentation provided by the borrower, the Administrator, in consultation 
 
2 See, e.g., section 303 of the Economic Aid Act; section 7(a)(37)(M) of the Small Business Act. 
3 15 U.S.C. 634(b)(11).   
4 15 U.S.C. 636(a). 
5 15 U.S.C. 634(b)(6) and (b)(7).   
6 13 CFR 120.524. 

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with the Secretary of the Treasury (Secretary), previously determined that it was appropriate to 
adopt additional procedures and criteria through which SBA will review whether an action by the 
borrower has resulted in its receipt of a PPP loan that did not meet program requirements.7  
SBA’s review of borrower certifications and representations regarding the borrower’s eligibility 
for a PPP loan and loan forgiveness, and the borrower’s use of PPP loan proceeds, is essential to 
ensure that PPP loans are directed to the entities Congress intended, and that PPP loan proceeds 
are used for the purposes Congress required, including the CARES Act’s and the Economic Aid 
Act’s central purposes of keeping workers paid and employed. 
Table of Contents 
IV.  Paycheck Protection Program Loan Forgiveness Requirements 
1. General 
a.  What amounts are eligible for forgiveness? 
b. For borrowers that are individuals with self-employment income who file a Form 1040, 
Schedule C or F, what amounts are eligible for forgiveness?  
2. Loan Forgiveness Process 
a. What is the general process to obtain loan forgiveness? 
b. When must a borrower apply for loan forgiveness or start making payments on a loan? 
3. Payroll Costs Eligible for Loan Forgiveness 
a. When must payroll costs be incurred and/or paid to be eligible for forgiveness? 
b. Are salary, wages, or commission payments to furloughed employees; bonuses; or hazard 
pay during the covered period eligible for loan forgiveness? 
c. Are there caps on the amount of loan forgiveness available for owner-employees and 
self-employed individuals’ own payroll compensation? 
 
7 This interim final rule is an exercise of SBA’s rulemaking authority under 15 U.S.C. 634(b), 15 U.S.C. 633(d), and 
5 U.S.C. App., Reorg. Plan No. 4 of 1965, 11(b), 13(a) (abolishing Loan Policy Board and transferring functions to 
the Administrator); sections 1106(k) (now section 7A(k) of the Small Business Act) and 1114 of the CARES Act, 
and section 307 of the Economic Aid Act. 

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d.   Are any individuals with an ownership stake in a PPP borrower exempt from application 
of the PPP owner-employee compensation rule when determining the amount of their 
compensation that is eligible for loan forgiveness? 
e. May a fishing boat owner include as payroll costs in its application for loan forgiveness 
any compensation paid to a crewmember who received his or her own PPP loan and is 
seeking forgiveness for amounts of compensation the crewmember received for 
performing services described in Section 3121(b)(20) of the Internal Revenue Code with 
respect to that owner’s fishing boat? 
4. Nonpayroll Costs Eligible for Loan Forgiveness 
a. When must nonpayroll costs be incurred and/or paid to be eligible for forgiveness? 
b. Are advance payments of interest on mortgage obligations eligible for loan forgiveness? 
c.   Are amounts attributable to the business operation of a tenant or sub-tenant of the PPP 
borrower or, in the context of home-based businesses, household expenses, eligible for 
forgiveness? 
d. Are rent payments to a related party eligible for loan forgiveness? 
5. Reductions to Loan Forgiveness Amount 
a. Will a borrower’s loan forgiveness amount be reduced if the borrower reduced the hours 
of an employee, then offered to restore the reduction in hours, but the employee declined 
the offer? 
b. What effect does a reduction in a borrower’s number of full-time equivalent (FTE) 
employees have on the loan forgiveness amount? 
c. What does “full-time equivalent employee” mean? 
d. How should a borrower calculate its number of FTE employees? 
e. What effect does a borrower’s reduction in employees’ salary or wages have on the loan 
forgiveness amount? 
f. How should borrowers seeking loan forgiveness account for the reduction based on a 
reduction in the number of employees (section 7A(d)(2)) relative to the reduction relating 
to salary and wages (section 7A(d)(3))? 
g. If a borrower restores reductions made to employee salaries and wages or FTE 
employees, can the borrower avoid a reduction in its loan forgiveness amount? 
h. Will a borrower’s loan forgiveness amount be reduced if an employee is fired for cause, 
voluntarily resigns, or voluntarily requests a schedule reduction? 

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i. Is a borrower with a loan of $50,000 or less exempt from any reductions to the loan 
forgiveness amount? 
6. Documentation Requirements 
a. What must borrowers submit for forgiveness of their PPP loans? 
b. What documentation must borrowers who are individuals with self-employment income 
who file a Form 1040, Schedule C or F, submit to their lender with their request for loan 
forgiveness? 
c. What additional documentation must a borrower submit when the President of the United 
States, Vice President of the United States, the head of an Executive department, or a 
Member of Congress, or the spouse of any of the preceding, directly or indirectly holds a 
controlling interest in the borrower? 
7. Lender Hold Harmless 
V. Paycheck Protection Program SBA Loan Review Procedures and Related Borrower and 
Lender Responsibilities 
1. SBA Reviews of Individual PPP Loans 
a. Will SBA review individual PPP loans? 
b. What borrower representations and statements will SBA review? 
c. When will SBA undertake a loan review? 
d. Will I have the opportunity to respond to SBA’s questions in a review? 
e. If SBA determines that a borrower is ineligible for a PPP loan, can the loan be forgiven?  
f. May a borrower appeal SBA’s determination that the borrower is ineligible for a PPP 
loan or ineligible for the loan amount or the loan forgiveness amount claimed by the 
borrower? 
2. The Loan Forgiveness Process for Lenders 
a. What should a lender review? 
b. What is the timeline for the lender’s decision on a loan forgiveness application? 
c. What should a lender do if it receives notice that SBA is reviewing a loan? 
d. What should a lender do if a borrower submits documentation of eligible costs that 
exceed a borrower’s PPP Loan Amount? 
3. Lender Fees 

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IV.  Paycheck Protection Program Loan Forgiveness Requirements 
1. General 
a.  What amounts are eligible for forgiveness?8 
Section 7A(b) of the Small Business Act provides that, subject to several important 
limitations, borrowers shall be eligible for forgiveness of their PPP loan in an amount 
equal to the sum of the following costs incurred and payments made during the covered 
period (as described in section IV.3. below). 
(1) Payroll costs.9  Payroll costs consist of compensation to employees (whose 
principal place of residence is the United States) in the form of salary, wages, 
commissions, or similar compensation; cash tips or the equivalent (based on 
employer records of past tips or, in the absence of such records, a reasonable, 
good-faith employer estimate of such tips); payment for vacation, parental, 
family, medical, or sick leave; allowance for separation or dismissal; payment for 
the provision of employee benefits consisting of group health care or group life, 
disability, vision, or dental insurance, including insurance premiums, and 
retirement; payment of state and local taxes assessed on compensation of 
employees; and for an independent contractor or sole proprietor, wages, 
commissions, income, or net earnings from self-employment, or similar 
compensation.  Payroll costs that are qualified wages taken into account in 
determining the Employer Retention Credit are not eligible for loan forgiveness.10 
 
8 This subsection was originally published at 85 FR 33004, section III.1. (June 1, 2020) and has been modified to 
conform to section 304 of the Economic Aid Act. 
9 “Payroll costs” has the same meaning as in subsections III.B.4.g. and h. of the consolidated interim final rule 
implementing updates to the Paycheck Protection Program. 86 FR 3692, 3702 (Jan. 14, 2021). 
10  Section 7(a)(37)(J)(iii) of the Small Business Act provides these amounts are not eligible for forgiveness for 
Second Draw PPP Loans.  This provision similarly provides that these amounts are not eligible for forgiveness for 
 

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(2) Interest payments on any business mortgage obligation on real or personal 
property that was incurred before February 15, 2020 (but not any prepayment or 
payment of principal). 
(3) Payments on business rent obligations on real or personal property under a lease 
agreement in force before February 15, 2020. 
(4) Business utility payments for the distribution of electricity, gas, water, 
transportation, telephone, or internet access for which service began before 
February 15, 2020. 
(5) Covered operations expenditures.  A covered operations expenditure is a payment 
for any business software or cloud computing service that facilitates business 
operations, product or service delivery, the processing, payment, or tracking of 
payroll expenses, human resources, sales and billing functions, or accounting or 
tracking of supplies, inventory, records and expenses.11 
(6) Covered property damage costs.  A covered property damage cost is a cost related 
to property damage and vandalism or looting due to public disturbances that 
occurred during 2020 that was not covered by insurance or other compensation.12 
(7) Covered supplier costs.  A covered supplier cost means an expenditure made by a 
borrower to a supplier of goods for the supply of goods that—(A) are essential to 
the operations of the borrower at the time at which the expenditure is made; and 
(B) is made pursuant to a contract, order, or purchase order—(i) in effect at any 
time before the covered period with respect to the applicable covered loan; or (ii) 
 
First Draw PPP Loans in order to provide consistent treatment and to prevent a borrower from receiving forgiveness 
for amounts for which the borrower will also receive a tax credit. 
11 This eligible nonpayroll cost was added by section 304 of the Economic Aid Act. 
12 This eligible nonpayroll cost was added by section 304 of the Economic Aid Act. 

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with respect to perishable goods, in effect before or at any time during the 
covered period with respect to the applicable covered loan.13   
(8) Covered worker protection expenditures.  A covered worker protection 
expenditure: 
(A) means an operating or a capital expenditure to facilitate the adaptation of the 
business activities of an entity to comply with requirements established or 
guidance issued by the Department of Health and Human Services, the Centers 
for Disease Control, or the Occupational Safety and Health Administration, or any 
equivalent requirements established or guidance issued by a State or local 
government related to the maintenance of standards for sanitation, social 
distancing, or any other worker or customer safety requirement related to 
COVID–19, during the period beginning on March 1, 2020 and ending the date on 
which the national emergency declared by the President under the National 
Emergencies Act (50 U.S.C. 1601 et seq.) with respect to the Coronavirus Disease 
2019 (COVID–19) expires; 
(B) may include— 
(i) the purchase, maintenance, or renovation of assets that create or expand— 
(I) a drive-through window facility; 
(II) an indoor, outdoor, or combined air or air pressure ventilation or filtration 
system; 
(III) a physical barrier such as a sneeze guard; 
(IV) an expansion of additional indoor, outdoor, or combined business space; 
 
13 This eligible nonpayroll cost was added by section 304 of the Economic Aid Act. 

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(V) an onsite or offsite health screening capability; or 
(VI) other assets relating to the compliance with the requirements or guidance 
described in subsection (A), as determined by the Administrator in consultation 
with the Secretary of Health and Human Services and the Secretary of Labor; and 
(ii) the purchase of— 
(I) covered materials described in section 328.103(a) of title 44, Code of Federal 
Regulations, or any successor regulation; 
(II) particulate filtering facepiece respirators approved by the National Institute 
for Occupational Safety and Health, including those approved only for emergency 
use authorization; or 
(III) other kinds of personal protective equipment, as determined by the 
Administrator in consultation with the Secretary of Health and Human Services 
and the Secretary of Labor; and 
(C) does not include residential real property or intangible property.14   
This interim final rule uses the term “nonpayroll costs” to refer to the payments described 
in (2)-(8) above.  Eligible nonpayroll costs cannot exceed 40 percent of the loan 
forgiveness amount.15  A borrower may receive forgiveness for  the nonpayroll costs 
described in (5), (6), (7) and (8) only if SBA had not yet remitted a forgiveness payment 
on the borrower’s loan to the borrower’s PPP lender as of December 27, 2020 (the date of 
the Economic Aid Act’s enactment).   
 
14 This eligible nonpayroll cost was added by section 304 of the Economic Aid Act. 
15 See section 7A(d)(8) of the Small Business Act. 

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b. For borrowers that are individuals with self-employment income who file a Form 1040, 
Schedule C or F, what amounts are eligible for forgiveness?16 
The amount of loan forgiveness can be up to the full principal amount of the loan plus 
accrued interest.  The actual amount of loan forgiveness will depend, in part, on the total 
amount spent during the covered period (as described in section IV.3 below)17 on: 
i. 
payroll costs including salary, wages, and tips, up to $100,000 of annualized pay 
per employee, as prorated for the period during which the payments are made or the 
obligation to make the payments is incurred (maximum per individual is $100,000 
prorated for the covered period, e.g., for an 8-week covered period a maximum of 
$15,385 and for a 24-week covered period a maximum of $46,154),18 as well as covered 
benefits for employees (but not owners), including health care expenses, retirement 
contributions, and state taxes imposed on employee payroll paid by the employer (such as 
unemployment insurance premiums), but excluding any qualified wages taken into 
account in determining the Employer Retention Credit;  
ii. 
owner compensation replacement, calculated based on 2019 or 202019 net profit20 
as described in subsection 3.c. below; forgiveness of such amounts is limited to either (a) 
the prorated portion of 2019 or 2020 net profit for a covered period up to 2.5 months, or 
(b) 2.5 months’ worth (2.5/12) of 2019 or 2020 net profit (up to $20,833) for a covered 
 
16 This subsection was originally published at 85 FR 21747, subsection III.1.f. (Apr. 20, 2020) and has been 
modified to conform to subsequent rules or guidance and sections 306, 313, and 344 of the Economic Aid Act.   
17 The Economic Aid Act amended the definition of the forgiveness covered period. 
18 Due to the amended definition of forgiveness covered period in the Economic Aid Act, this calculated amount has 
changed. 
19 For First Draw PPP loans made in 2020, borrowers use 2019.  For First Draw PPP loans made in 2021 and Second 
Draw PPP Loans, borrowers use the year (2019 or 2020) that was used to calculate the borrower’s loan amount. 
20 For self-employed borrowers that file Form 1040, Schedule F and have no employees, gross income may be used 
instead of net profit throughout this calculation. For self-employed borrowers that file Schedule F and have 
employees, the difference between gross income and employee payroll costs may be used instead of net profit 
throughout this calculation.  See section 313 of the Economic Aid Act. 

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period greater than 2.5 months,21 excluding any qualified sick leave equivalent amount 
for which a credit is claimed under section 7002 of the Families First Coronavirus 
Response Act (FFCRA) (Public Law 116-127) or qualified family leave equivalent 
amount for which a credit is claimed under section 7004 of FFCRA;  
iii. 
payments of interest on mortgage obligations on real or personal property 
incurred before February 15, 2020, to the extent they are deductible on Form 1040 
Schedule C or F (business mortgage payments); 
iv. 
rent payments on lease agreements in force before February 15, 2020, to the 
extent they are deductible on Form 1040 Schedule C or F (business rent payments);   
v. 
utility payments under service agreements dated before February 15, 2020 to the 
extent they are deductible on Form 1040 Schedule C or F (business utility payments); 
vi.   
any covered operations expenditures to the extent they are deductible on Form 
1040 Schedule C or F;22 
vii.   
any covered property damage costs to the extent they are deductible on Form 
1040 Schedule C or F;23  
viii.   Any covered supplier costs to the extent they are deductible on Form 1040 
Schedule C or F;24 and  
ix.   
any covered worker protection expenditures to the extent they are deductible on 
Form 1040 Schedule C or F.25 
 
21 Section 306 of the Economic Aid Act allows the borrower to select a covered period between 8 weeks and 24 
weeks. 
22 This eligible nonpayroll cost was added by section 304 of the Economic Aid Act. 
23 This eligible nonpayroll cost was added by section 304 of the Economic Aid Act. 
24 This eligible nonpayroll cost was added by section 304 of the Economic Aid Act. 
25 This eligible nonpayroll cost was added by section 304 of the Economic Aid Act. 

18 
A borrower may receive forgiveness for the new nonpayroll costs described in vi., vii., 
viii., and ix. only if SBA had not yet remitted a forgiveness payment on the borrower’s 
loan to the borrower’s PPP lender as of December 27, 2020.   
2. Loan Forgiveness Process 
a.  What is the general process to obtain loan forgiveness?26  
To receive loan forgiveness on either a First Draw PPP Loan or a Second Draw PPP 
Loan, a borrower must complete and submit the Loan Forgiveness Application27 to its 
lender (or to the lender servicing its loan).  For Second Draw PPP Loans in excess of 
$150,000, the borrower must submit its loan forgiveness application for the First Draw 
PPP Loan before or simultaneously with the loan forgiveness application for the Second 
Draw PPP Loan, even if the calculated amount of forgiveness on the First Draw PPP 
Loan is zero.28   
As a general matter, the lender will review the application and make a decision regarding 
loan forgiveness.  The lender has 60 days from receipt of a complete application to issue 
a decision to SBA.  If the lender determines that the borrower is entitled to forgiveness of 
some or all of the amount applied for under the statute and applicable regulations, the 
lender must request payment from SBA at the time the lender issues its decision to SBA.  
 
26 This subsection was originally published at 85 FR 33004, section III.2. (June 1, 2020) and was amended by 85 FR 
38304, subsection III.2.a. (June 26, 2020) and 85 FR 66214, subsections III.2.a. and b. (Oct. 19, 2020) and has been 
modified to conform to section 307 of the Economic Aid Act. 
27 SBA Form 3508, 3508EZ, 3508S, as applicable, or lender equivalent.  Loan Forgiveness Application forms were 
amended to conform to the Economic Aid Act, including section 307, which requires a simplified forgiveness 
application for loans of not more than $150,000.  The Simplified Forgiveness Application is SBA Form 3508S (as 
amended). 
28 This requirement is necessary to provide information relevant to the borrower’s eligibility for the Second Draw 
PPP Loan and loan forgiveness.  A borrower is eligible for a Second Draw PPP Loan if they have used, or will use, 
the full amount of its First Draw PPP Loan (including the amount of any increase on such First Draw PPP Loan) on 
authorized uses on or before the expected date on which the Second Draw PPP Loan will be disbursed.  See interim 
final rule on Second Draw PPP Loans. 86 FR 3712, 3717 (Jan. 14, 2021).  This requirement does not apply to 
Second Draw PPP Loans of $150,000 or less that use the simplified forgiveness application (SBA Form 3508S).  

19 
SBA will, subject to any SBA review of the borrower’s loan(s) or loan application(s), 
remit the appropriate forgiveness amount to the lender, plus any interest accrued through 
the date of payment, not later than 90 days after the lender issues its decision to SBA.  
The EIDL Advance Amount received by the borrower will not reduce the amount of 
forgiveness to which the borrower is entitled and will not be deducted from the 
forgiveness payment amount that SBA remits to the Lender.29  If SBA determines in the 
course of its review that the borrower was ineligible for the PPP loan under the statute, 
the SBA rules or guidance available at the time of the borrower’s loan application, or the 
terms of the borrower’s PPP loan application (for example, because the borrower lacked 
an adequate basis for the certifications that it made in its PPP loan application), the loan 
will not be eligible for loan forgiveness.  The lender must notify the borrower of the 
forgiveness amount.  If only a portion of the loan is forgiven, or if the forgiveness request 
is denied, any remaining balance due on the loan must be repaid by the borrower on or 
before the maturity date of the loan.  The lender must notify the borrower of remittance 
by SBA of (i) the loan forgiveness amount (or that SBA determined that no amount of the 
loan is eligible for forgiveness), and (ii) the date on which the borrower’s first payment is 
due, if applicable.  If SBA determines that the full amount of the loan is eligible for 
forgiveness and remits the full amount of the loan to the lender, the lender must mark the 
PPP loan note as “paid in full” and report the status of the loan as “paid in full” on the 
next monthly 1502 report filed by the lender.30   
 
29 Section 333 of the Economic Aid Act repealed the CARES Act provision requiring SBA to deduct EIDL Advance 
Amounts received by borrowers from the forgiveness payment amounts remitted by SBA to the lender.  Any EIDL 
Advance Amounts previously deducted from a borrower’s forgiveness amount will be remitted to the lender, 
together with interest through the remittance date. 
30  Although the note is marked “Paid in Full,” the forgiven amount is considered canceled indebtedness under 
section 7A(c)(1) of the Small Business Act. 

20 
The general loan forgiveness process described above applies only to loan forgiveness 
applications that are not reviewed by SBA prior to the lender’s decision on the 
forgiveness application.  Part V of this interim final rule describes SBA’s procedures for 
reviewing PPP loan applications and loan forgiveness applications. 
b.  When must a borrower apply for loan forgiveness or start making payments on a loan?31 
A borrower may submit a loan forgiveness application any time on or before the maturity 
date of the loan if the borrower has used all of the loan proceeds for which the borrower 
is requesting forgiveness, except that a borrower applying for forgiveness of a Second 
Draw PPP Loan that is more than $150,000 must submit the loan forgiveness application 
for its First Draw PPP Loan before or simultaneously with the loan forgiveness 
application for its Second Draw PPP Loan.32  If the borrower does not apply for loan 
forgiveness within 10 months after the last day of the maximum covered period of 24 
weeks,33 or if SBA determines that the loan is not eligible for forgiveness (in whole or in 
part), the PPP loan is no longer deferred and the borrower must begin paying principal 
and interest.  If this occurs, the lender must notify the borrower of the date the first 
payment is due.  The lender must report that the loan is no longer deferred to SBA on the 
next monthly SBA Form 1502 report filed by the lender. 
 
31 This subsection was originally published at 85 FR 38304, section III.1.c. (June 26, 2020) and has been modified to 
conform to sections 306 and 307 of the Economic Aid Act. 
32 Because section 306 of the Economic Aid Act allows the borrower to select a covered period between 8 weeks 
and 24 weeks, there is no longer a need to allow a borrower to apply for forgiveness “before the end of the covered 
period” and that text has been deleted. 
33 The Economic Aid Act is silent on what covered period applies for a borrower who does not apply for 
forgiveness, so SBA will  apply the longest available covered period to such borrowers. 

21 
3. Payroll Costs Eligible for Loan Forgiveness 
a. When must payroll costs be incurred and/or paid to be eligible for forgiveness?34 
In general, payroll costs paid or incurred during the covered period are eligible for 
forgiveness.  For purposes of loan forgiveness, the covered period is the period beginning 
on the date the lender disburses the PPP loan and ending on a date selected by the 
borrower that occurs during the period (i) beginning on the date that is 8 weeks after the 
date of disbursement, and (ii) ending on the date that is 24 weeks after the date of 
disbursement.35  The covered periods for a First Draw PPP Loan and a Second Draw PPP 
Loan cannot overlap; the borrower must use all proceeds of the First Draw PPP Loan for 
eligible expenses before disbursement of the Second Draw PPP Loan. 
Payroll costs are considered paid on the day that paychecks are distributed or the 
borrower originates an ACH credit transaction.  Payroll costs incurred during the 
borrower’s last pay period of the covered period are eligible for forgiveness if paid on or 
before the next regular payroll date; otherwise, payroll costs must be paid during the 
covered period to be eligible for forgiveness.  Payroll costs generally are incurred on the 
day the employee’s pay is earned (i.e., on the day the employee worked).  For employees 
who are not performing work but are still on the borrower’s payroll, payroll costs are 
incurred based on the schedule established by the borrower (typically, each day that the 
employee would have performed work). 
 
34 This subsection was originally published at 85 FR 33004, subsection III.3.a. (June 1, 2020) and amended by 85 
FR 38304, subsection III.1.d. (June 26, 2020) and has been modified to conform to section 306 of the Economic Aid 
Act and for readability. 
35 Amended to conform to the section 306 of Economic Aid Act change to definition of covered period.  The option 
to elect an alternative covered period has been removed because the Economic Aid Act provided borrowers 
flexibility to choose the end of their covered period.  

22 
b.  Are salary, wages, or commission payments to furloughed employees; bonuses; or hazard 
pay during the covered period eligible for loan forgiveness?36 
Yes.  The CARES Act defines the term “payroll costs” broadly to include compensation 
in the form of salary, wages, commissions, or similar compensation.  If a borrower pays 
furloughed employees their salary, wages, or commissions during the covered period, 
those payments are eligible for forgiveness as long as they do not exceed an annual salary 
of $100,000, as prorated for the period during which the payments are made or the 
obligation to make the payments is incurred.  The Administrator, in consultation with the 
Secretary, has also determined that, if an employee’s total compensation does not exceed 
$100,000 on an annualized basis, as prorated for the period during which the payments 
are made or the obligation to make the payments is incurred, the employee’s hazard pay 
and bonuses are eligible for loan forgiveness because they constitute a supplement to 
salary or wages, and are thus a similar form of compensation.   
c. Are there caps on the amount of loan forgiveness available for owner-employees and 
self-employed individuals’ own payroll compensation?37  
Yes.  Forgiveness is capped at 2.5 months’ worth (2.5/12) of an owner-employee or self-
employed individual’s 2019 or 202038 compensation (up to a maximum $20,833 per 
individual in total across all businesses).  The individual’s total compensation may not 
exceed $100,000 on an annualized basis, as prorated for the period during which the 
payments are made or the obligation to make the payments is incurred.  For example, for 
 
36 This subsection was originally published at 85 FR 33004, subsection III.3.b. (June 1, 2020) and has been modified 
to conform to section 344 of the Economic Aid Act. 
37 This subsection was originally published at 85 FR 33004, subsection III.3.c. (June 1, 2020) and amended by 85 
FR 38304, subsection III.1.d (June 26, 2020) and has been modified to conform to sections 308 and 344 of the 
Economic Aid Act and for readability. 
38 For First Draw PPP loans made in 2020, borrowers use 2019.  For First Draw PPP loans made in 2021 and Second 
Draw PPP loans, borrowers use the year (2019 or 2020) that was used to calculate the borrower’s loan amount. 

23 
borrowers that elect to use an eight-week covered period, the amount of loan forgiveness 
requested for owner-employees and self-employed individuals’ payroll compensation is 
capped at eight weeks’ worth (8/52) of 2019 or 2020  compensation (i.e., approximately 
15.38 percent of 2019 or 2020 compensation) or $15,385 per individual, whichever is 
less, in total across all businesses.  For borrowers that elect to use a ten-week covered 
period, the cap is ten weeks’ worth (10/52) of 2019 or 2020 compensation (approximately 
19.23 percent) or $19,231 per individual, whichever is less, in total across all businesses.  
For a covered period longer than 2.5 months, the amount of loan forgiveness requested 
for owner-employees and self-employed individuals’ payroll compensation is capped at 
2.5 months’ worth (2.5/12) of 2019 or 2020 compensation (up to $20,833) in total across 
all businesses.   
In particular, C-corporation owner-employees are capped by the prorated amount of their 
2019 or 202039 employee cash compensation and employer retirement and health, life, 
disability, vision and dental insurance contributions made on their behalf.  S-corporation 
owner-employees are capped by the prorated amount of their 2019 or 202040 employee 
cash compensation and employer retirement contributions made on their behalf.  
However, employer health, life, disability, vision and dental insurance contributions 
made on their behalf cannot be separately added; those payments are already included in 
their employee cash compensation.  Schedule C or F filers are capped by the prorated 
amount of their owner compensation replacement, calculated based on 2019 or 2020 net 
 
39 Use whichever year was used to calculate the borrower’s loan amount.   
40 Use whichever year was used to calculate the borrower’s loan amount.   

24 
profit.41  General partners are capped by the prorated amount of their 2019 or 2020 net 
earnings from self-employment (reduced by claimed section 179 expense deduction, 
unreimbursed partnership expenses, and depletion from oil and gas properties) multiplied 
by 0.9235.  For self-employed individuals, including Schedule C or F filers and general 
partners, retirement and health, life, disability, vision or dental insurance contributions 
are included in their net self-employment income and therefore cannot be separately 
added to their payroll calculation.  LLC members are subject to the rules based on their 
LLC’s tax filing status in the reference year used to determine their loan amount. 
d. Are any individuals with an ownership stake in a PPP borrower exempt from application 
of the PPP owner-employee compensation rule when determining the amount of their 
compensation that is eligible for loan forgiveness?42  
Yes, owner-employees with less than a 5 percent ownership stake in a C- or S-
corporation are not subject to the owner-employee compensation rule in subsection 
IV.3.c. above.   
 
41 For self-employed borrowers that file Form 1040, Schedule F and have no employees, gross income may be used 
instead of net profit. For self-employed borrowers that file Schedule F and have employees, the difference between 
gross income and employee payroll costs may be used instead of net profit.  See section 313 of the Economic Aid 
Act. 
42 This subsection was originally published at 85 FR 52881, section III.1. (Aug. 27, 2020) and has been modified for 
readability. 

25 
e. May a fishing boat owner include as payroll costs in its application for loan forgiveness 
any compensation paid to a crewmember who received his or her own PPP loan and is 
seeking forgiveness for amounts of compensation the crewmember received for 
performing services described in Section 3121(b)(20) of the Internal Revenue Code with 
respect to that owner’s fishing boat?43  
No.  If a fishing boat crewmember obtains his or her own PPP loan during the fishing 
boat owner’s covered period and seeks forgiveness of that loan based in part on 
compensation from a particular fishing boat owner, the fishing boat owner cannot also 
obtain PPP loan forgiveness based on compensation paid to that same crewmember.  This 
restriction applies only if the crewmember is performing services described in section 
3121(b)(20) of the Internal Revenue Code for the particular fishing boat owner.  The 
fishing boat owner is responsible for determining whether any of its crewmembers 
received their own PPP loans during the fishing boat owner’s loan forgiveness covered 
period.   
4. Nonpayroll Costs Eligible for Loan Forgiveness 
a.  When must nonpayroll costs be incurred and/or paid to be eligible for forgiveness?44 
A nonpayroll cost is eligible for forgiveness if it was:  
i. paid during the covered period; or 
ii. incurred during the covered period and paid on or before the next regular billing 
date, even if the billing date is after the covered period.  
 
43 This subsection was originally published at 85 FR 39066, subsection III.2. (June 30, 2020) and has been modified 
for consistency with the Economic Aid Act. 
44 This subsection was originally published at 85 FR 33004, subsection III.4.a. (June 1, 2020) and amended by 85 
FR 38304, subsection III.1.e (June 26, 2020) and has been modified for readability. 

26 
Example:  A borrower that received a loan before June 5, 2020 uses a 24-week covered 
period that begins on June 1 and ends on November 15.  The borrower pays its electricity 
bills for June through October during the covered period and pays its November 
electricity bill on December 10, which is the next regular billing date.  The borrower may 
seek loan forgiveness for its June through October electricity bills, because they were 
paid during the covered period.  In addition, the borrower may seek loan forgiveness for 
the portion of its November electricity bill through November 15 (the end of the covered 
period), because it was incurred during the covered period and paid on the next regular 
billing date.  
b.  Are advance payments of interest on mortgage obligations eligible for loan 
forgiveness?45 
No.  Advance payments of interest on a covered mortgage obligation are not eligible for 
loan forgiveness because the CARES Act’s loan forgiveness provisions regarding 
mortgage obligations specifically exclude “prepayments.”  Principal on mortgage 
obligations is not eligible for forgiveness under any circumstances. 
c. Are amounts attributable to the business operation of a tenant or sub-tenant of the PPP 
borrower or, in the context of home-based businesses, household expenses, eligible for 
forgiveness?46 
No, the amount of loan forgiveness requested for nonpayroll costs may not include any 
amount attributable to the business operation of a tenant or sub-tenant of the PPP 
borrower or, for home-based businesses, household expenses.  The examples below 
illustrate this rule. 
 
45 This subsection was originally published at 85 FR 33004, subsection III.4.b. (June 1, 2020). 
46 This subsection was originally published at 85 FR 52881, subsection III.2.a. (Aug. 27, 2020). 

27 
Example 1: A borrower rents an office building for $10,000 per month and sub-leases out 
a portion of the space to other businesses for $2,500 per month.  Only $7,500 per month 
is eligible for loan forgiveness.   
Example 2: A borrower has a mortgage on an office building it operates out of, and it 
leases out a portion of the space to other businesses. The portion of mortgage interest that 
is eligible for loan forgiveness is limited to the percent share of the fair market value of 
the space that is not leased out to other businesses.  As an illustration, if the leased space 
represents 25% of the fair market value of the office building, then the borrower may 
only claim forgiveness on 75% of the mortgage interest. 
Example 3: A borrower shares a rented space with another business.  When determining 
the amount that is eligible for loan forgiveness, the borrower must prorate rent and utility 
payments in the same manner as on the borrower’s 2019 tax filings, or if a new business, 
the borrower’s expected 2020 tax filings. 
Example 4: A borrower works out of his or her home.  When determining the amount of 
nonpayroll costs that are eligible for loan forgiveness, the borrower may include only the 
share of covered expenses that were deductible on the borrower’s 2019 tax filings, or if a 
new business, the borrower’s expected 2020 tax filings. 
d. 
Are rent payments to a related party eligible for loan forgiveness?47 
Yes, as long as (1) the amount of loan forgiveness requested for rent or lease payments to 
a related party is no more than the amount of mortgage interest owed on the property 
during the covered period that is attributable to the space being rented by the business, 
 
47 This subsection was originally published at 85 FR 52881, subsection III.2.b. (Aug. 27, 2020) and has been 
modified for readability. 

28 
and (2) the lease and the mortgage were entered into prior to February 15, 2020.48  Any 
ownership in common between the business and the property owner is a related party for 
these purposes.  The borrower must provide its lender with mortgage interest 
documentation to substantiate these payments.  While rent or lease payments to a related 
party may be eligible for forgiveness, mortgage interest payments to a related party are 
not eligible for forgiveness.   
5. Reductions to Loan Forgiveness Amount 
Section 7A of the Small Business Act specifically requires certain reductions in a 
borrower’s loan forgiveness amount based on reductions in full-time equivalent 
employees or in employee salary and wages.  It includes an important statutory 
exemption for borrowers that have eliminated the reduction on or before December 31, 
2020 (or, for a PPP loan made on or after December 27, 2020, not later than the last day 
of the loan’s covered period).49  Section 7A(d)(7) of the Small Business Act also allows 
exemptions from reductions in loan forgiveness amounts based on employee availability 
and business activity.  In addition, SBA and Treasury have adopted regulatory 
exemptions to the reduction rules for borrowers that (1) have offered to restore employee 
hours at the same salary or wages, even if the employees have not accepted, (2) fired an 
employee for cause or have an employee that voluntarily resigns or voluntarily requests a 
schedule reduction, (3) eliminate reductions by December 31, 2020 or, for a PPP loan 
made after December 27, 2020, the last day of the loan’s covered period, or (4) have a 
 
48 In this context, the related party itself would not also be eligible to request forgiveness for this amount. 
49 This subsection was originally published at 85 FR 33004, subsection III.5. (June 1, 2020) and amended by 85 FR 
38304, subsection III.1.f. (June 26, 2020), and has been modified to conform to subsequent rules or guidance and 
section 311 of  the Economic Aid Act. 

29 
PPP loan of $50,000 or less.  The instructions to the loan forgiveness applications and the 
guidance below explain how the statutory forgiveness reduction formulas work. 
a. Will a borrower’s loan forgiveness amount be reduced if the borrower reduced the hours 
of an employee, then offered to restore the reduction in hours, but the employee declined 
the offer?50  
No.  In calculating the loan forgiveness amount, a borrower may exclude any reduction in 
full-time equivalent employee headcount that is attributable to an individual employee if:  
i. The borrower made a good faith, written offer to restore the reduced hours of 
such employee;  
ii. the offer was for the same salary or wages and same number of hours as earned 
by such employee in the last pay period prior to the reduction in hours;  
iii. the offer was rejected by such employee; and  
iv. the borrower has maintained records documenting the offer and its rejection.  
b. What effect does a reduction in a borrower’s number of full-time equivalent (FTE) 
employees have on the loan forgiveness amount?51  
In general, a reduction in FTE employees during the covered period reduces the loan 
forgiveness amount by the same percentage as the percentage reduction in FTE 
employees.  For both First Draw PPP Loans and Second Draw PPP Loans, the borrower 
must first select a reference period:  (i) February 15, 2019 through June 30, 2019; (ii) 
January 1, 2020 through February 29, 2020; or (iii) in the case of a seasonal employer,52 
 
50 This subsection was originally published at 85 FR 33004, subsection III.5.a. (June 1, 2020) and amended by 85 
FR 38304, section III.5. (June 26, 2020) and has been modified for readability.  
51  This subsection was originally published at 85 FR 33004, subsection III.5.b. (June 1, 2020) and amended by 85 
FR 38304, section III.1.f. (June 26, 2020) and has been modified to conform to sections 306, 311 and 336 of the 
Economic Aid Act and for readability. 
52 The term “seasonal employer” is defined in section 7(a)(36)(A)(xiii) of the Small Business Act. 

30 
either of the two preceding methods or a consecutive 12-week period between February 
15, 2019 and February 15, 2020.53  If the average number of FTE employees during the 
covered period is less than during the reference period, the total eligible expenses 
available for forgiveness is reduced proportionally by the percentage reduction in FTE 
employees.  For example, if a borrower had 10.0 FTE employees during the reference 
period and this declined to 8.0 FTE employees during the covered period, the percentage 
of FTE employees declined by 20 percent and thus only 80 percent of otherwise eligible 
expenses are available for forgiveness.   
Borrowers are exempted from the loan forgiveness reduction arising from a proportional 
reduction in FTE employees during the covered period if the borrower is able to 
document in good faith the following: (1) an inability to rehire individuals who were 
employees of the borrower on February 15, 2020; and (2) an inability to hire similarly 
qualified individuals for unfilled positions on or before December 31, 2020 (or, for a PPP 
loan made on or after December 27, 2020, not later than the last day of the loan’s covered 
period).54  Borrowers are required to inform the applicable state unemployment insurance 
office of any employee’s rejected rehire offer within 30 days of the employee’s rejection 
of the offer.  The documents that borrowers should maintain to show compliance with 
this exemption include, but are not limited to, the written offer to rehire an individual, a 
written record of the offer’s rejection, and a written record of efforts to hire a similarly 
qualified individual. 
 
53 This decision to permit seasonal employers to use, as a reference period, any consecutive 12-week period between 
February 15, 2019 and February 15, 2020 is an exercise of the Secretary’s rulemaking authority under section 1109 
of the CARES Act.  This reference period is consistent with section 336 of the Economic Aid Act, which amends 
the calculation of the maximum loan amount for seasonal employers. 
54 This text was originally published at 85 FR 38304, subsection III.1.f. (June 26, 2020) and has been modified to 
conform to section 311 of the Economic Aid Act. 

31 
Borrowers are also exempted from the loan forgiveness reduction arising from a 
reduction in the number of FTE employees during the covered period if the borrower is 
able to document in good faith an inability to return to the same level of business activity 
as the borrower was operating at before February 15, 2020, due to compliance with 
requirements established or guidance issued between March 1, 2020 and December 31, 
2020 (or, for a PPP loan made on or after December 27, 2020, not later than the last day 
of the loan’s covered period)55 by the Secretary of Health and Human Services, the 
Director of the Centers for Disease Control and Prevention (CDC), or the Occupational 
Safety and Health Administration related to the maintenance of standards for sanitation, 
social distancing, or any other worker or customer safety requirement related to COVID-
19 (COVID Requirements or Guidance).  Specifically, borrowers that can certify that 
they have documented in good faith that their reduction in business activity during the 
covered period stems directly or indirectly from compliance with such COVID 
Requirements or Guidance are exempt from any reduction in their forgiveness amount 
stemming from a reduction in FTE employees during the covered period.  Such 
documentation must include copies of applicable COVID Requirements or Guidance for 
each business location and relevant borrower financial records. 
Example:  A PPP borrower is in the business of selling beauty products both online and at 
its physical store.  During the covered period, the local government where the borrower’s 
store is located orders all non-essential businesses, including the borrower’s business, to 
shut down their stores, based in part on COVID-19 guidance issued by the CDC in March 
2020.  Because the borrower’s business activity during the covered period was reduced 
 
55 This text was originally published at 85 FR 38304, subsection III.1.f. (June 26, 2020) and has been modified to 
conform to section 311 the Economic Aid Act. 

32 
compared to its activity before February 15, 2020 due to compliance with COVID 
Requirements or Guidance, the borrower satisfies the exemption and will not have its 
forgiveness amount reduced because of a reduction in FTEs during the covered period, if 
the borrower in good faith maintains records regarding the reduction in business activity 
and the local government’s shutdown orders that reference a COVID Requirement or 
Guidance as described above. 
c. What does “full-time equivalent employee” mean?56 
Full-time equivalent employee means an employee who works 40 hours or more, on 
average, each week.  The hours of employees who work less than 40 hours are calculated 
as proportions of a single full-time equivalent employee and aggregated, as explained 
further below in subsection IV.5.d.  
d. How should a borrower calculate its number of FTE employees?57 
Borrowers seeking forgiveness must document their average number of FTE employees 
during the covered period and their selected reference period.  If applicable, a borrower 
must perform this calculation for both its First Draw PPP Loan and Second Draw PPP 
Loan.  For purposes of this calculation, borrowers must divide the average number of 
hours paid for each employee per week by 40, capping this quotient at 1.0.  For example, 
an employee who was paid 48 hours per week during the covered period would be 
considered to be an FTE employee of 1.0.   
For employees who were paid for less than 40 hours per week, borrowers may choose to 
calculate the full-time equivalency in one of two ways.  First, the borrower may calculate 
 
56 This subsection was originally published at 85 FR 33004, subsection III.5.c. (June 1, 2020) and has been modified 
for readability. 
57 This subsection was originally published at 85 FR 33004, subsection III.5.d. (June 1, 2020) and has been modified 
to conform to section 311 of the Economic Aid Act and for readability. 

33 
the average number of hours a part-time employee was paid per week during the covered 
period.  For example, if an employee was paid for 30 hours per week on average during 
the covered period, the employee could be considered to be an FTE employee of 0.75.  
Similarly, if an employee was paid for ten hours per week on average during the covered 
period, the employee could be considered to be an FTE employee of 0.25.  Second, for 
administrative convenience, borrowers may elect to use a full-time equivalency of 0.5 for 
each part-time employee.  The Administrator recognizes that not all borrowers maintain 
hours-worked data, and has decided to afford such borrowers this flexibility in 
calculating the full-time equivalency of their part-time employees.   
Borrowers may select only one of these two methods, and must apply that method 
consistently to all of their part-time employees for the covered period and the selected 
reference period.  In either case, the borrower shall provide the aggregate total of FTE 
employees for both the selected reference period and the covered period by adding 
together all of the employee-level FTE employee calculations.  The borrower must then 
divide the average FTE employees during the covered period by the average FTE 
employees during the selected reference period, resulting in the reduction quotient. 
e. What effect does a borrower’s reduction in employees’ salary or wages have on the loan 
forgiveness amount?58 
Under section 7A(d)(3) of the Small Business Act, a reduction in an employee’s salary or 
wages in excess of 25 percent will generally result in a reduction in the loan forgiveness 
amount, unless an exception applies.  Specifically, for each new employee in 2020 and 
2021, as well as each existing employee who was not paid more than the annualized 
 
58 This subsection was originally published at 85 FR 33004, subsection III.5.e. (June 1, 2020) and has been modified 
to conform to section 306 of the Economic Aid Act and for readability. 

34 
equivalent of $100,000 in any pay period in 2019, the borrower must reduce the total 
forgiveness amount by the total dollar amount of the salary or wage reductions that are in 
excess of 25 percent of base salary or wages of the employee during the most recent full 
quarter during which the employee was employed before the covered period (the 
reference period), subject to exceptions for borrowers who restore reduced wages or 
salaries (see g. below).  This reduction calculation is performed on a per employee basis, 
not in the aggregate.  Additionally, this reduction is performed based on the covered 
period and reference period applicable to the First Draw Loan or Second Draw Loan. 
Example:  A borrower is using a 24-week covered period.  This borrower reduced a full-
time employee’s weekly salary from $1,000 per week during the reference period to $700 
per week during the covered period.  The employee continued to work on a full-time 
basis during the covered period, with an FTE of 1.0.  In this case, the first $250 (25 
percent of $1,000) is exempted from the loan forgiveness reduction.  The borrower 
seeking forgiveness would list $1,200 as the salary/hourly wage reduction for that 
employee (the extra $50 weekly reduction multiplied by 24 weeks).59   
Example:  A borrower has elected to use an eight-week covered period.  This borrower 
reduced a full-time employee’s weekly salary from $1,000 per week during the reference 
period to $700 per week during the covered period.  The employee continued to work on 
a full-time basis during the covered period, with an FTE of 1.0.  In this case, the first 
$250 (25 percent of $1,000) is exempted from the loan forgiveness reduction.  The 
 
59 This subsection previously provided that a borrower must account for the salary reduction for the full 24-week 
covered period if the borrower applies for forgiveness before the end of the covered period.  85 FR 38304, 38308 
(June 26, 2020).  This text has been removed because section 306 of the Economic Aid Act allows the borrower to 
select a covered period between 8 and 24 weeks and there is no need to apply for forgiveness before the end of the 
covered period. 

35 
borrower seeking forgiveness would list $400 as the salary/hourly wage reduction for that 
employee (the extra $50 weekly reduction multiplied by eight weeks). 
f. How should borrowers seeking loan forgiveness account for the reduction based on a 
reduction in the number of employees (section 7A(d)(2)) relative to the reduction relating 
to salary and wages (section 7A(d)(3))?60 
To ensure that borrowers are not doubly penalized, the salary/wage reduction applies 
only to the portion of the decline in employee salary and wages that is not attributable to 
the FTE reduction.   
Example: An hourly wage employee had been working 40 hours per week during the 
borrower selected reference period (FTE employee of 1.0) and the borrower reduced the 
employee’s hours to 20 hours per week during the covered period (FTE employee of 0.5).  
There was no change to the employee’s hourly wage during the covered period.  Because 
the hourly wage did not change, the reduction in the employee’s total wages is entirely 
attributable to the FTE employee reduction and the borrower is not required to conduct a 
salary/wage reduction calculation for that employee.   
g. If a borrower restores reductions made to employee salaries and wages or FTE 
employees, can the borrower avoid a reduction in its loan forgiveness amount?61 
Yes.  Section 7A(d)(5) of the Small Business Act provides that if certain employee 
salaries and wages were reduced between February 15, 2020 and April 26, 2020 (the safe 
harbor period) but the borrower eliminates those reductions by December 31, 2020 (or, 
for a PPP loan made on or after December 27, 2020, by the last day of the loan’s covered 
 
60 This subsection was originally published at 85 FR 33004, subsection III.5.e. (June 1, 2020) and has been modified 
for readability. 
61 This subsection was originally published at 85 FR 33004, subsection III.5.g. (June 1, 2020) and has been modified 
to conform to section 311 of the Economic Aid Act. 

36 
period), the borrower is exempt from any reduction in loan forgiveness amount that 
would otherwise be required due to reductions in salaries and wages under section 
7A(d)(3) of the Small Business Act.  Similarly, if a borrower eliminates any reductions in 
FTE employees occurring during the safe harbor period by December 31, 2020 (or, for a 
PPP loan made on or after December 27, 2020, by last day of the loan’s covered period), 
the borrower is exempt from any reduction in loan forgiveness amount that would 
otherwise be required due to reductions in FTE employees.62   
This provision implements section 7A(d)(5) of the Small Business Act, which gives 
borrowers an opportunity to cure reductions in FTEs, salary/wage reductions in excess of 
25 percent, or both, using the applicable methodology set forth in section 7A(d)(5).  The 
Small Business Act provides that the reduction in FTEs or the reduction in salary/hourly 
wages must be eliminated not later than December 31, 2020 (or, for a PPP loan made on 
or after December 27, 2020, not later than the last day of the loan’s covered period).  This 
does not change or affect the requirement that at least 60 percent of the loan forgiveness 
amount must be attributable to payroll costs.  
h. Will a borrower’s loan forgiveness amount be reduced if an employee is fired for cause, 
voluntarily resigns, or voluntarily requests a schedule reduction?63 
No.  When an employee of the borrower is fired for cause, voluntarily resigns, or 
voluntarily requests a reduced schedule during the covered period (FTE reduction event), 
the borrower may count such employee at the same full-time equivalency level before the 
 
62 In light of the flexibility the Small Business Act provides to borrowers with respect to their selection of the 
reference time period for any potential reduction in loan forgiveness, and the statutory authority for SBA and the 
Treasury to grant de minimis exemptions from this requirement, if the borrower meets the requirements for the FTE 
reduction safe harbor, it will not be subject to any loan forgiveness reduction based on a reduction in FTE 
employees. 
63 This subsection was originally published at 85 FR 33004, subsection III.5.h. (June 1, 2020) and has been modified 
to conform to section 304 of the Economic Aid Act and for readability.  

37 
FTE reduction event when calculating the section 7A(d)(2) FTE employee reduction 
penalty.  Borrowers that avail themselves of this de minimis exemption shall maintain 
records demonstrating that each such employee was fired for cause, voluntarily resigned, 
or voluntarily requested a schedule reduction.  The borrower shall provide such 
documentation upon request. 
i. Is a borrower with a loan of $50,000 or less exempt from any reductions to the loan 
forgiveness amount?64 
Yes.  A borrower with a loan of $50,000 or less, other than any borrower that together 
with its affiliates received First Draw PPP Loans totaling $2 million or more or Second 
Draw PPP Loans totaling $2 million or more, is exempt from any reductions in the 
borrower’s loan forgiveness amount based on reductions in FTE employees (section 
7A(d)(2) of the Small Business Act) or reductions in employee salary or wages (section 
7A(d)(3) of the Small Business Act) that would otherwise apply.  As such, subsections 
IV.5.a. through IV.5.h. above do not apply to qualifying borrowers with loans of $50,000 
or less . 
 
64 This subsection was originally published at 85 FR 66214, subsection III.1.b. (Oct. 19, 2020) and has been 
modified to conform to sections 304 and 307 the Economic Aid Act and for readability.  As described further below 
in subsection 6.a and 6.b, borrowers with loans up to $150,000 may use SBA Form 3508S.  However, only 
borrowers with loans of $50,000 or less, other than any borrower that together with its affiliates received First Draw 
Loans totaling $2 million or more or Second Draw Loans totaling $2 million or more, are exempt from any 
reductions to the loan forgiveness amount.  Accordingly, the exemptions in this subsection are limited to qualifying 
borrowers with loans of $50,000 or less.  A borrower with a loan greater than $50,000 and up to $150,000 must 
comply with the requirements under the Paycheck Protection Program, including calculating any reduction in 
forgiveness amounts based on reductions in FTEs or employee salary or wages.  

38 
6. Documentation Requirements 
a. What must borrowers submit for forgiveness of their PPP loans?65 
The loan forgiveness application form details the documentation requirements; 
specifically, documentation each borrower must submit with its Loan Forgiveness 
Application (SBA Form 3508, 3508EZ, 3508S as applicable, or lender equivalent), 
documentation each borrower is required to maintain and make available upon request, 
and documentation each borrower may voluntarily submit with its loan forgiveness 
application.  An eligible borrower that received a loan of $150,000 or less should use the 
SBA Form 3508S and shall not, at the time of its application for loan forgiveness, be 
required to submit any application or documentation in addition to the certification and 
information required by section 7A(l)(1)(A) of the Small Business Act.  However, an 
eligible borrower that received a Second Draw loan of $150,000 or less and is using the 
SBA Form 3508S must, before or at the time of its application for loan forgiveness, 
submit documentation sufficient to establish that the borrower experienced a reduction in 
revenue as provided in subsection (g)(2)(v) of the interim final rule on Second Draw PPP 
Loans, unless the borrower already provided such documentation at the time of its 
application for the Second Draw PPP Loan.66  Such documentation may include relevant 
tax forms, including annual tax forms, or, if relevant tax forms are not available, a copy 
of the applicant’s quarterly income statements or bank statements.  
 
65  This subsection was originally published at 85 FR 33004, section III.6. (June 1, 2020) and amended at 85 FR 
38304, subsection III.1.g. (June 26, 2020) and has been modified to conform to sections 304 and 307 of the 
Economic Aid Act and for readability.  
66  See interim final rule on Second Draw PPP Loans. 86 FR 3712, 3721 (Jan. 14, 2021).  Subsection (g)(2)(v) of the 
interim final rule on Second Draw PPP Loans implements section 7(a)(37)(J)(v) of the Small Business Act. 

39 
For Second Draw PPP Loans, all borrowers must certify on their loan forgiveness 
application that the borrower used all First Draw PPP Loan amounts on eligible expense 
prior to disbursement of the Second Draw PPP Loan.  For Second Draw PPP Loans in 
excess of $150,000, the borrower must submit its loan forgiveness application for the 
First Draw PPP Loan before or simultaneously with the loan forgiveness application for 
the Second Draw PPP Loan, even if the calculated forgiveness amount for the First Draw 
PPP Loan is zero.   
b. What documentation are borrowers who are individuals with self-employment income 
who file a Form 1040, Schedule C or F required to submit to their lender with their 
request for loan forgiveness?67 
For borrowers that received loans of $150,000 or less that use the SBA Form 3508S, the 
borrower must submit the certification and information required by section 7A(l)(1)(A) 
of the Small Business Act and, for a Second Draw PPP Loan, revenue reduction 
documentation if such documentation was not provided at the time of application.68  All 
other borrowers must submit the certification required by section 7A(e)(3) of the Small 
Business Act, and (if the borrower has employees) Form 941 and state quarterly business 
and individual employee wage reporting and unemployment insurance tax forms or 
equivalent payroll processor records that best correspond to the covered period (with 
evidence of any retirement and group health, life, disability, vision, and dental insurance 
contributions).  Whether or not the borrower has employees, the borrower must submit 
evidence of business rent, business mortgage interest payments on real or personal 
 
67  This subsection was originally published at 85 FR 21747, subsection III.1.g. (Apr. 20, 2020) and has been 
modified to conform to sections 304, 307, 308, and 313 of the Economic Aid Act and for readability. 
68 See subsection (g)(2)(v) of the interim final rule on Second Draw PPP Loans. 86 FR 3712, 3721 (Jan. 14, 2021). 

40 
property, business utility payments, or payments for a covered operations expenditure, 
covered property damage cost, covered supplier cost, or covered worker protection 
expenditure during the covered period if the borrower used loan proceeds for those 
purposes.  This documentation may include cancelled checks, payment receipts, 
transcripts of accounts, purchase orders, orders, invoices, or other documents verifying 
payments on nonpayroll costs. 
For all loans, the 2019 or 2020 Form 1040 Schedule C or F that the borrower provided at 
the time of the PPP loan application must be used to determine the amount of net profit 
allocated to the owner for the covered period.69   
c. What additional documentation must a borrower submit when the President of the United 
States, Vice President of the United States, the head of an Executive department, or a 
Member of Congress, or the spouse of any of the preceding, directly or indirectly holds a 
controlling interest in the borrower?70 
For any First Draw PPP loan made before December 27, 2020, if the President of the 
United States, Vice President of the United States, the head of an Executive department, 
or a Member of Congress, or the spouse of any such person as determined under 
applicable common law, directly or indirectly held a controlling interest in the borrower 
on the date of the loan application, the borrower is required to make certain disclosures 
following submission of the borrower’s application for loan forgiveness.    
For purposes of this section, the term “controlling interest” means owning, controlling, or 
holding not less than 20 percent, by vote or value, of the outstanding amount of any class 
 
69 For self-employed borrowers that file Form 1040, Schedule F and have no employees, gross income may be used 
instead of net profit. For self-employed borrowers that file Schedule F and have employees, the difference between 
gross income and employee payroll costs may be used instead of net profit. 
70 This subsection has been added to conform to section 322 of the Economic Aid Act. 

41 
of equity interest in a borrower.  For purposes of making this determination, the securities 
owned, controlled or held by the individual and spouse shall be aggregated.  The term 
“equity interest” means (1) a share in a borrower, without regard to whether the share is 
transferable or classified as stock or anything similar, (2) a capital or profit interest in a 
limited liability company or partnership, or (3) a warrant or right, other than a right to 
convert, to purchase, sell, or subscribe to a share of interest described in (1) or (2), 
respectively.   The term “Executive department” has the meaning given the term in 
section 101 of title 5, United States Code.  The term “Member of Congress” means a 
Member of the Senate or House of Representatives, a Delegate to the House of 
Representatives, and the Resident Commissioner from Puerto Rico.  
If the borrower submitted a loan forgiveness application to its PPP lender before 
December 27, 2020, then the principal executive officer, or individual performing a 
similar function, of the borrower shall submit to its PPP lender an SBA Form 3508D 
disclosing the controlling interest(s) not later than January 26, 2021.  If the PPP lender 
has already submitted a forgiveness decision to SBA, the lender shall promptly transmit 
the SBA Form 3508D to SBA.  Otherwise, the PPP lender shall transmit the SBA Form 
3508D to SBA at the time the lender issues its forgiveness decision to SBA.  If the 
borrower submits a loan forgiveness application to its PPP lender on or after December 
27, 2020, then the principal executive officer, or individual performing a similar function, 
of the borrower shall submit to its PPP lender an SBA Form 3508D disclosing the 
controlling interest(s) not later than 30 days after submitting the application.  The PPP 
lender shall transmit the SBA Form 3508D to SBA with the PPP lender’s forgiveness 

42 
decision.  Alternatively, the PPP lender may transmit the completed Form 3508D to SBA 
when received. 
An entity is prohibited from receiving a PPP loan after December 27, 2020 if a 
controlling interest is held directly or indirectly by the President of the United States, 
Vice President of the United States, the head of an Executive department, or a Member of 
Congress, or the spouse of any of the preceding.71  
7. Lender Hold Harmless72 
Under what circumstances may a lender rely on a certification or documentation 
submitted by an eligible PPP borrower that received a PPP loan? 
A lender may rely on any certification or documentation submitted by a PPP applicant or 
an eligible PPP borrower that received a PPP loan that—(a) is submitted pursuant to all 
applicable statutory requirements, regulations, and guidance related to a PPP loan, 
including sections 7(a)(36), 7(a)(37), and 7A of the Small Business Act; and (b) attests 
that the PPP applicant or eligible PPP borrower, as applicable, has accurately provided 
the certification or documentation to the lender in accordance with the statutory 
requirements, regulations, and guidance described in (a).  With respect to a lender that 
relies on a borrower certification or documentation meeting the requirements of this 
subsection, an enforcement action may not be taken against the lender related to the PPP 
loan, and the lender shall not be subject to any penalties relating to loan origination or 
forgiveness of the PPP loan, if: 
 
71 See subsection III.B.2.a. of the consolidated interim final rule implementing updates to the Paycheck Protection 
Program, 86 FR 3692, 3698 (Jan. 14, 2021); subsection III.e.6. of the interim final rule for Second Draw PPP loans, 
86 FR 3712, 3719 (Jan. 14, 2021). 
72 This section has been added to conform to section 305 of the Economic Aid Act. 

43 
(i) the lender acts in good faith relating to loan origination or forgiveness of the PPP loan 
based on that reliance; and 
(ii) all other relevant Federal, State, local, and other statutory and regulatory requirements 
applicable to the lender are satisfied with respect to the PPP loan.73   
V. Paycheck Protection Program SBA Loan Review Procedures and Related Borrower and 
Lender Responsibilities 
1. SBA Reviews of Individual PPP Loans 
a. Will SBA review individual PPP loans?74 
Yes.  SBA may review any PPP loan, as the Administrator deems appropriate, as 
described below.  
b. What borrower representations and statements will SBA review?75 
The Administrator is authorized to review the following: 
Borrower Eligibility: The Administrator may review whether a borrower is eligible for 
the PPP loan based on the provisions of the CARES Act, the Economic Aid Act, the rules 
and guidance available at the time of the borrower’s PPP loan application, and the terms 
of the borrower’s loan application.  See FAQ 17 (posted April 6, 2020).76  These include, 
but are not limited to, SBA’s regulations under 13 CFR 120.110 (as modified and 
clarified by the PPP Interim Final Rules) and 13 CFR 121.301(f) and the information, 
certifications, and representations on the Borrower Application Form (SBA Form 2483, 
 
73 This provision is effective as if included in the CARES Act and shall apply to any loan made pursuant to section 
7(a)(36) or 7(a)(37) of the Small Business Act before, on, or after the date of enactment of the Economic Aid Act, 
including forgiveness of such a loan.  
74 This subsection was originally published at 85 FR 33010, subsection III.1.a. (June 1, 2020). 
75 This subsection was originally published at 85 FR 33010, subsection III.1.b. (June 1, 2020) and amended by 85 
FR 38304, subsection III.2.a. (June 26, 2020) and 85 FR 66214, subsection III.2.a. (Oct. 19, 2020) and has been 
modified to conform to section 311 of the Economic Aid Act.  
76 https://www.sba.gov/document/support--faq-lenders-borrowers. 

44 
2483-SD, or lender’s equivalent form) and the Loan Forgiveness Application Form (SBA 
Form 3508, 3508EZ, 3508S, or lender’s equivalent form).  With respect to a Second 
Draw PPP Loan, this may include a review of whether the borrower experienced the 25 
percent revenue reduction required under the Economic Aid Act.  
Loan Amounts and Use of Proceeds: The Administrator may review whether a borrower 
calculated the loan amount correctly and used loan proceeds for the allowable uses 
specified in the CARES Act and the Economic Aid Act.   
Loan Forgiveness Amounts:  The Administrator may review whether a borrower is 
entitled to loan forgiveness in the amount claimed on the borrower’s Loan Forgiveness 
Application (SBA Form 3508, 3508EZ, 3508S, or lender’s equivalent form).   
c. When will SBA undertake a loan review?77 
For a PPP loan of any size, SBA may undertake a review at any time in SBA’s discretion. 
For example, SBA may review a loan if the loan documentation submitted to SBA by the 
lender or any other information indicates that the borrower may be ineligible for a PPP 
loan, or may be ineligible to receive the loan amount or loan forgiveness amount claimed 
by the borrower.78  Additionally, section 7A(l)(1)(E) of the Small Business Act expressly 
provides that SBA may review and audit PPP loans of $150,000 or less and access any 
records the borrower is required to retain.  SBA may, in its discretion, review a 
borrower’s First Draw PPP Loan and Second Draw PPP Loan at the same time or at 
different times.  For loans of more than $150,000, as noted on the loan forgiveness 
application forms, the borrower must retain PPP documentation in its files for six years 
 
77 This subsection was originally published at 85 FR 33010, subsection III.1.c. (June 1, 2020) and has been modified 
to conform to sections 307 and 311 of the Economic Aid Act. 
78 13 CFR 120.524(c).   

45 
after the date the loan is forgiven or repaid in full.  For loans of $150,000 and under, the 
borrower must retain records relevant to the form that prove compliance with the 
requirements of section 7(a)(36) or 7(a)(37), as applicable, of the Small Business Act—
for employment records, for the 4-year period following submission of the loan 
forgiveness application, and for other records, for the 3-year period following submission 
of the loan forgiveness application.  All borrowers must permit authorized representatives 
of SBA, including representatives of its Office of Inspector General, to access such files 
upon request.  Additionally, all borrowers must provide documentation independently to 
a lender to satisfy relevant Federal, State, local or other statutory or regulatory 
requirements or in connection with an SBA loan review.  
Lenders must comply with applicable SBA requirements for records retention, which for 
Federally regulated lenders means compliance with the requirements of their federal 
financial institution regulator and for SBA supervised lenders (as defined in 13 CFR 
120.10 and including PPP lenders with authority under SBA Form 3507) means 
compliance with 13 CFR 120.461. 
d. Will I have the opportunity to respond to SBA’s questions in a review?79 
Yes.  If loan documentation submitted to SBA by the lender or any other information 
indicates that the borrower may be ineligible for a PPP loan or may be ineligible to 
receive the loan amount or loan forgiveness amount claimed by the borrower, SBA will 
require the lender to contact the borrower in writing to request additional information.  
SBA may also request information directly from the borrower.  The lender will provide 
 
79 This subsection was originally published at 85 FR 33010, subsection III.1.d. (June 1, 2020). 

46 
any additional information provided to it by the borrower to SBA.  SBA will consider all 
information provided by the borrower in response to such an inquiry. 
Failure to respond to SBA’s inquiry may result in a determination that the borrower was 
ineligible for a PPP loan or ineligible to receive the loan amount or loan forgiveness 
amount claimed by the borrower.   
e. If SBA determines that a borrower is ineligible for a PPP loan, can the loan be 
forgiven?80  
No.  If SBA determines that a borrower is ineligible for the PPP loan, SBA will direct the 
lender to deny the loan forgiveness application.  An SBA determination that a borrower is 
ineligible for a First Draw PPP Loan may also result in an SBA determination that the 
borrower is ineligible for any Second Draw PPP Loan, and SBA may direct the lender to 
deny any loan forgiveness application submitted for the Second Draw PPP Loan.  
Further, if SBA determines that the borrower is ineligible for the loan amount or loan 
forgiveness amount claimed by the borrower, SBA will direct the lender to deny the loan 
forgiveness application in whole or in part, as appropriate.  SBA may also seek 
repayment of the outstanding PPP loan balance or pursue other available remedies.  
Section 7A(b) of the Small Business Act provides for forgiveness of a PPP loan only if 
the borrower is an “eligible recipient.”  The Administrator has determined that to be an 
eligible recipient that is entitled to forgiveness under section 7A(b), the borrower must be 
an “eligible recipient” under section 7(a)(36) and section 7(a)(37) of the Small Business 
Act and rules and guidance available at the time of the borrower’s loan application.  This 
requirement promotes the public interest, aligns SBA’s functions with other 
 
80 This subsection was originally published at 85 FR 33010, subsection III.1.e. (June 1, 2020) and has been modified 
for readability. 

47 
governmental policies, and appropriately carries out the PPP provisions of the CARES 
Act and the Economic Aid Act, including by preventing evasion of the requirements for 
PPP loan eligibility and ensuring program integrity with respect to this emergency 
financial assistance program.  It is also consistent with the CARES Act’s nonrecourse 
provision, 15 U.S.C. 636(a)(36)(F)(v), which limits SBA’s recourse against individual 
shareholders, members, or partners of a PPP borrower for nonpayment of a PPP loan only 
if the borrower is an eligible recipient of the loan.   
f. May a borrower appeal SBA’s determination that the borrower is ineligible for a PPP 
loan or ineligible for the loan amount or the loan forgiveness amount claimed by the 
borrower? 81 
Yes.  SBA has issued a separate interim final rule addressing this process.82  
2. The Loan Forgiveness Process for Lenders 
a. What should a lender review?83  
When a borrower submits SBA Form 3508 or lender’s equivalent form, the lender shall: 
i. Confirm receipt of the borrower certifications contained in the SBA Form 3508 or 
lender’s equivalent form. 
ii. Confirm receipt of the documentation the borrower must submit to aid in 
verifying payroll and nonpayroll costs, as specified in the instructions to the SBA 
Form 3508 or lender’s equivalent form. 
 
81 This subsection was originally published at 85 FR 33010, subsection III.1.f. (June 1, 2020) and has been modified 
to reflect the issuance of the interim final rule on appeals of SBA loan review decisions under the Paycheck 
Protection Program. 85 FR 52883 (Aug. 27, 2020).  
82 See 85 FR 52883 (Aug. 27, 2020). 
83 This subsection was originally published at 85 FR 33010, subsection III.2.a. (June 1, 2020) and amended by 85 
FR 38304, subsection III.2.b. (June 26, 2020) and 85 FR 66214, subsection III.2.b. (Oct. 19, 2020) and has been 
modified to conform to sections 307 and 311 of the Economic Aid Act. 

48 
iii. Confirm the borrower’s calculations on the borrower’s SBA Form 3508 or 
lender’s equivalent form, including the dollar amount of the (A) Cash 
Compensation, Non-Cash Compensation, and Compensation to Owners claimed 
on Lines 1, 4, 6, 7, 8, and 9 on PPP Schedule A and (B) Business Mortgage 
Interest Payments, Business Rent or Lease Payments, Business Utility Payments, 
Covered Operations Expenditures, Covered Property Damage Costs, Covered 
Supplier Costs, and Covered Worker Protection Expenditures claimed on Lines 2 
through 8 on the PPP Loan Forgiveness Calculation Form, by reviewing the 
documentation submitted with the SBA Form 3508 or lender’s equivalent form.  
iv. Confirm that the borrower made the calculation on Line 14 of the SBA Form 
3508 or lender’s equivalent form correctly, by dividing the borrower’s Eligible 
Payroll Costs claimed on Line 1 by 0.60. 
When the borrower submits SBA Form 3508EZ or lender’s equivalent form, the lender 
shall: 
i. Confirm receipt of the borrower certifications contained in the SBA Form 
3508EZ or lender’s equivalent form. 
ii. Confirm receipt of the documentation the borrower must submit to aid in 
verifying payroll and nonpayroll costs, as specified in the instructions to the SBA 
Form 3508EZ or lender’s equivalent form. 
iii. Confirm the borrower’s calculations on the borrower’s SBA Form 3508EZ or 
lender’s equivalent form, including the dollar amount of the Payroll Costs, 
Business Mortgage Interest Payments, Business Rent or Lease Payments, 
Business Utility Payments, Covered Operations Expenditures, Covered Property 

49 
Damage Costs, Covered Supplier Costs, and Covered Worker Protection 
Expenditures claimed on Lines 1 through 8 of the SBA Form 3508EZ or lender’s 
equivalent form, by reviewing the documentation submitted with the SBA Form 
3508EZ or lender’s equivalent form. 
iv. Confirm that the borrower made the calculation on Line 11 of the SBA Form 
3508EZ or lender’s equivalent form correctly, by dividing the borrower’s Eligible 
Payroll Costs claimed on Line 1 by 0.60. 
Providing an accurate calculation of the loan forgiveness amount is the responsibility of 
the borrower, and the borrower attests to the accuracy of its reported information and 
calculations on the Loan Forgiveness Application Form.  Lenders are expected to 
perform a good-faith review, in a reasonable time, of the borrower’s calculations and 
supporting documents concerning amounts eligible for loan forgiveness.  For example, 
minimal review of calculations based on a payroll report by a recognized third-party 
payroll processor would be reasonable.  By contrast, if payroll costs are not documented 
with such recognized sources, more extensive review of calculations and data would be 
appropriate.  The borrower shall not receive forgiveness without submitting all required 
documentation to the lender. 
As the First Interim Final Rule84 and section IV.7 above indicate, lenders may rely on 
borrower representations.  If the lender identifies errors in the borrower’s calculation or 
material lack of substantiation in the borrower’s supporting documents, the lender should 
work with the borrower to remedy the issue.  As stated in paragraph III.3.c of the First 
Interim Final Rule, the lender does not need to independently verify the borrower’s 
 
84 85 FR 20811, 20815-20816 (Apr. 15, 2020). 

50 
reported information if the borrower submits documentation supporting its request for 
loan forgiveness and attests that it accurately verified the payments for eligible costs. 
When a borrower submits SBA Form 3508S or lender’s equivalent form, the lender shall: 
i. 
Confirm receipt of the borrower certifications contained in the SBA Form 
3508S or lender’s equivalent form. 
ii. 
In the case of a Second Draw PPP Loan for which the borrower did not 
provide documentation of revenue reduction with its application and the 
lender did not conduct a review of the documentation at the time of 
application, confirm the dollar amount and percentage of the borrower’s 
revenue reduction by performing a good faith review, in a reasonable time, 
of the borrower’s calculations and supporting documents concerning the 
borrower’s revenue reduction.85 
If the lender identifies errors in the borrower’s calculation or material lack of 
substantiation in the borrower’s supporting documents regarding revenue reduction, the 
lender should work with the borrower to remedy the issue.  Providing an accurate 
calculation of the loan forgiveness amount is the responsibility of the borrower, and the 
borrower attests to the accuracy of its reported information and calculations on the Loan 
Forgiveness Application.  The borrower shall not receive forgiveness without submitting 
all required documentation to the lender. 
As the First Interim Final Rule86 and section IV.7 above indicate, lenders may rely on 
borrower representations.  As stated in paragraph III.3.c of the First Interim Final Rule, 
 
85 See subsection (h)(2)(i)(D) of the interim final rule on Second Draw PPP Loans.  86 FR 3712, 3721 (Jan. 14, 
2021).   
86 85 FR 20811, 20815-20816 (Apr. 15, 2020). 

51 
the lender does not need to independently verify the borrower’s reported information if 
the borrower submits documentation supporting its request for loan forgiveness (if 
required) and attests that it accurately verified the payments for eligible costs. 
b. What is the timeline for the lender’s decision on a loan forgiveness application?87 
The lender must issue a decision to SBA on a loan forgiveness application not later than 
60 days after receipt of a complete loan forgiveness application from the borrower.  That 
decision may take the form of an approval (in whole or in part); denial; or (if directed by 
SBA) a denial without prejudice due to a pending SBA review of the loan for which 
forgiveness is sought.  In the case of a denial without prejudice, the borrower may 
subsequently request that the lender reconsider its application for loan forgiveness, unless 
SBA has determined that the borrower is ineligible for a PPP loan.  The Administrator 
has determined that this process appropriately balances the need for efficient processing 
of loan forgiveness applications with considerations of program integrity, including 
affording SBA the opportunity to ensure that borrower representations and certifications 
(including concerning eligibility for a PPP loan) were accurate.   
When the lender issues its decision to SBA approving the application (in whole or in 
part), it must include the following: 
i. For applications submitted using the SBA Form 3508 or lender’s equivalent form: 
(1) the PPP Loan Forgiveness Calculation Form; 
(2) PPP Schedule A;   
 
87 This subsection was originally published at 85 FR 33010, subsection III.2.b. (June 1, 2020) and amended by 85 
FR 38304, subsection III.2.b. (June 26, 2020) and 85 FR 66214, subsection III.2.b. (Oct. 19, 2020) and has been 
modified to conform to sections 311, 322, and 333 of the Economic Aid Act and for readability. 

52 
(3) the (optional) PPP Borrower Demographic Information Form (if submitted 
to the lender); and 
(4) the SBA Form 3508D, if applicable. 
ii. For applications submitted using the SBA Form 3508EZ, 3508S, or lender’s 
equivalent form: 
(1) the SBA Form 3508EZ, 3508S, or lender’s equivalent form;   
(2) the (optional) Borrower Demographic Information Form (if submitted to 
the lender); and 
(3) the SBA Form 3508D, if applicable. 
The lender must confirm that the information provided by the lender to SBA accurately 
reflects lender’s records for the loan, that the lender has made its decision in accordance 
with the requirements set forth in subsection V.2.a., and for a Second Draw PPP Loan of 
$150,000 or less, if applicable, the lender has reviewed the revenue reduction 
documentation provided by the borrower and confirmed the dollar amount and 
percentage of the borrower’s revenue reduction.  If the lender determines that the 
borrower is entitled to forgiveness of some or all of the amount applied for under the 
statute and applicable regulations, the lender must request payment from SBA at the time 
the lender issues its decision to SBA.  SBA will, subject to any SBA review of the 
borrower’s loan(s) or loan application(s), remit the appropriate forgiveness amount to the 
lender, plus any interest accrued through the date of payment, not later than 90 days after 
the lender issues its decision to SBA.  The EIDL Advance Amount received by the 
borrower will not reduce the amount of forgiveness to which the borrower is entitled and 
will not be deducted from the forgiveness payment amount that SBA remits to the 

53 
Lender.88  The lender is responsible for notifying the borrower of remittance by SBA of 
the loan forgiveness amount (or that SBA determined that no amount of the loan is 
eligible for forgiveness) and the date on which the borrower’s first payment is due, if 
applicable. 
When the lender issues its decision to SBA determining that the borrower is not entitled 
to forgiveness in any amount, the lender must provide SBA with the reason for its denial, 
together with the following: 
i. For applications submitted using the SBA Form 3508 or lender’s equivalent form: 
(1) the PPP Loan Forgiveness Calculation Form;  
(2) PPP Schedule A;   
(3) the (optional) PPP Borrower Demographic Information Form (if submitted to 
the lender); and 
(4) the SBA Form 3508D, if applicable. 
ii. For applications submitted using the SBA Form 3508EZ, 3508S, or lender’s 
equivalent form: 
(1) the SBA Form 3508EZ, 3508S, or lender’s equivalent form;   
(2) the (optional) Borrower Demographic Information Form (if submitted to the 
lender); and 
(3) the SBA Form 3508D, if applicable. 
The lender must confirm that the information provided by the lender to SBA accurately 
reflects lender’s records for the loan, and that the lender has made its decision in 
 
88 Section 333 of the Economic Aid Act repealed the CARES Act provision requiring SBA to deduct EIDL Advance 
Amounts received by borrowers from the forgiveness payment amounts remitted by SBA to the lender.  Any EIDL 
Advance Amounts previously deducted from a borrower’s forgiveness amount will be remitted to the lender, 
together with interest to the remittance date. 

54 
accordance with the requirements set forth in subsection V.2.a., and for a Second Draw 
PPP Loan of $150,000 or less, if applicable, the lender has reviewed the revenue 
reduction documentation provided by the borrower and confirmed the dollar amount and 
percentage of the borrower’s revenue reduction.  The lender must also notify the 
borrower in writing that the lender has issued a decision to SBA denying the loan 
forgiveness application and provide SBA with a copy of the notice.89  The notice to the 
borrower must include the reasons that the lender concluded that the borrower is not 
entitled to loan forgiveness in any amount and inform the borrower that the borrower has 
30 calendar days from receipt of the notification to seek, through the lender, SBA review 
of the lender’s decision.90  SBA reserves the right to review the lender’s decision in its 
sole discretion.  Within 30 days of notice from the lender, a borrower may notify the 
lender that it is requesting that SBA review the lender’s decision in accordance with 
subsection V.2.c. below.  Within 5 days of receipt, the lender must notify SBA of the 
borrower’s request for review.  SBA will notify the lender if SBA decides to review the 
lender’s decision or if SBA declines a request for review.  If the borrower does not timely 
request SBA review or SBA declines the request for review, the lender is responsible for 
notifying the borrower of the date on which the borrower’s first payment is due.  If SBA 
accepts a borrower’s request for review, SBA will notify the borrower and the lender of 
the results of the review.  If SBA denies forgiveness in whole or in part, the lender is 
responsible for notifying the borrower of the date on which the borrower’s first payment 
is due. 
 
89 This change has been made so that SBA can determine whether the borrower requested review within the 
appropriate time frame. 
90 This text has been added to clarify the information that will be provided to borrowers regarding the lender’s 
forgiveness decision. 

55 
c. What should a lender do if it receives notice that SBA is reviewing a loan?91  
SBA may begin a review of any PPP loan of any size at any time in SBA’s discretion. 
SBA may, in its discretion, review the borrower’s First Draw PPP Loan and Second 
Draw PPP Loan at the same time or at different times.  If SBA undertakes such a review, 
SBA will notify the lender in writing and the lender must notify the borrower in writing 
within five business days of receipt.   
Within five business days of receipt of such notice, the lender shall transmit to SBA 
electronic copies of the following:   
i. The Borrower Application Form (SBA Form 2483, 2483-SD, or lender’s 
equivalent form) and all supporting documentation provided by the borrower, 
including revenue reduction documentation provided by the borrower on a Second 
Draw PPP Loan.    
ii. The Loan Forgiveness Application (SBA Form 3508, 3508EZ, 3508S, or lender’s 
equivalent form), and all supporting documentation provided by the borrower (if 
the lender has received such application), including revenue reduction 
documentation provided by the borrower on a Second Draw PPP Loan of 
$150,000 or less if not provided at the time of loan application.  If the lender 
receives the borrower’s loan forgiveness application after it receives notice that 
SBA has commenced a loan review, the lender shall transmit electronic copies of 
the application and all supporting documentation provided by the borrower to 
SBA within five business days of receipt.   
 
91 This subsection was originally published at 85 FR 33010, subsection III.2.c. (June 1, 2020) and amended by 85 
FR 38304, subsection III.2.b. (June 26, 2020) and 85 FR 66214, subsection III.2.b. (Oct. 19, 2020) and has been 
modified to conform to section 311 of the Economic Aid Act and updates to SBA loan review procedures. 

56 
The lender must also request that the borrower provide the lender with the 
applicable documentation that the instructions to the Loan Forgiveness 
Application Form (SBA Form 3508, 3508EZ, 3508S, or lender’s equivalent) 
instruct the borrower to maintain but not submit (documentation listed under 
“Documents that Each Borrower Must Maintain but is Not Required to Submit”).  
For Second Draw PPP Loans of $150,000 or less where a loan forgiveness 
application has not been submitted by the borrower, the lender must also request 
that the borrower provide the lender with revenue reduction documentation, if not 
previously provided to the lender.  
The lender must submit documents received from the borrower to SBA within 
five business days of receipt from the borrower. 
iii. A signed and certified transcript of account.  
iv. A copy of the executed note evidencing the PPP loan.   
v.  Any memorandum or other analysis that the lender prepared in making its 
decision on the borrower’s loan forgiveness application, if applicable. 
vi. Any other documents related to the loan requested by SBA.  
If SBA has notified the lender that SBA has commenced a loan review, the lender should 
issue a forgiveness decision to SBA not later than 60 days after receipt of the complete 
loan forgiveness application from the borrower, unless otherwise directed by SBA.  

57 
d. What should a lender do if a borrower submits documentation of eligible costs that 
exceed a borrower’s PPP Loan Amount?92 
The amount of loan forgiveness that a borrower may receive cannot exceed the principal 
amount of the PPP loan.  Whether a borrower submits SBA Form 3508, 3508EZ, 3508S, 
or lender’s equivalent form, a lender should confirm receipt of the documentation the 
borrower is required to submit to aid in verifying payroll and nonpayroll costs, and, if 
applicable (for SBA Form 3508, 3508EZ, or lender’s equivalent form), confirm the 
borrower’s calculations on the borrower’s Loan Forgiveness Application, up to the 
amount required to reach the requested Forgiveness Amount.  Supporting documentation 
regarding a borrower’s payroll and nonpayroll costs is not required to be submitted to the 
lender with the SBA Form 3508S.  
3. Lender Fees93 
 
Are lender processing fees subject to clawback if a lender has not fulfilled its obligations 
under PPP regulations? 
A lender is required to repay the processing fee to SBA if a lender is found guilty of an 
act of fraud in connection with the PPP loan.  In such case, the loan is not eligible for a 
guaranty.94   
VI.  Additional Information 
SBA may provide further guidance, if needed, through SBA notices that will be posted on 
SBA’s website at www.sba.gov.  Questions on the Paycheck Protection Program may be directed 
 
92 This subsection was originally published at 85 FR 66214, subsection III.2.c. (Oct. 19, 2020) and has been 
modified to conform to section 307 of the Economic Aid Act. 
93 This section was originally published at 85 FR 33010, subsection III.3. (June 1, 2020) and has been modified to 
conform to section 340 of the Economic Aid Act.  Section 340 of the Economic Aid Act provides that a lender may 
not be required to repay a processing fee unless the lender is found guilty of an act of fraud in connection with the 
PPP loan. 
94 See 13 CFR 120.524.   

58 
to the Lender Relations Specialist in the local SBA Field Office.  The local SBA Field Office 
may be found at https://www.sba.gov/tools/local-assistance/districtoffices.  
Compliance with Executive Orders 12866, 12988, 13132, 13563, and 13771, the 
Congressional Review Act, the Administrative Procedure Act, the Paperwork Reduction 
Act (44 U.S.C. Ch. 35), and the Regulatory Flexibility Act (5 U.S.C. 601-612).  
Executive Orders 12866, 13563, and 13771  
This interim final rule is economically significant for the purposes of Executive Orders 
12866 and 13563.  SBA, however, is proceeding under the emergency provision at Executive 
Order 12866 section 6(a)(3)(D) based on the need to move expeditiously to mitigate the current 
economic conditions arising from the COVID–19 emergency.  This rule’s designation under 
Executive Order 13771 will be informed by public comment. 
This rule is necessary to implement the Economic Aid Act in order to provide economic 
relief to small businesses nationwide adversely impacted under the COVID-19 Emergency 
Declaration.  We anticipate that this rule will result in substantial benefits to small businesses, 
their employees, and the communities they serve.  However, we lack data to estimate the effects 
of this rule.  
The Administrator of the Office of Management and Budget’s Office of Information and 
Regulatory Affairs (OIRA) has determined that this is a major rule for purposes of Subtitle E of 
the Small Business Regulatory Enforcement and Fairness Act of 1996 (also known as the 
Congressional Review Act or CRA) (5 U.S.C. 804(2) et seq.).  Under the CRA, a major rule 
takes effect 60 days after the rule is published in the Federal Register.  5 U.S.C. 801(a)(3). 
Notwithstanding this requirement, the CRA allows agencies to dispense with the 
requirements of § 801 when the agency for good cause finds that such procedure would be 

59 
impracticable, unnecessary, or contrary to the public interest and the rule shall take effect at such 
time as the agency promulgating the rule determines.  5 U.S.C. 808(2).  Pursuant to § 808(2), 
SBA for good cause finds that a 60-day delay to provide public notice is impracticable and 
contrary to the public interest.  Likewise, for the same reasons, SBA for good cause finds that 
there are grounds to waive the 30-day effective date delay under the Administrative Procedure 
Act.  5 U.S.C. 553(d)(3). 
As discussed elsewhere in this interim final rule, the Economic Aid Act provided that several 
of the changes relating to loan forgiveness are effective as if included in the CARES Act and 
apply to any loan made pursuant to section 7(a)(36) of the Small Business Act before, on, or 
after December 27, 2020, including forgiveness of such a loan.  Accordingly, loans that were 
made in 2020 but that have not yet received forgiveness will be forgiven based on changes made 
in the Economic Aid Act, as implemented in this interim final rule.  Given the urgent need to 
provide borrowers that are eligible for loan forgiveness with timely relief, the Administrator in 
consultation with the Secretary has determined that it is impractical and not in the public interest 
to provide a delayed effective date.  An immediate effective date will allow SBA to continue 
remitting forgiveness payments to lenders without disruption and in accordance with the 
amendments made by the Economic Aid Act.  
Executive Order 12988  
SBA has drafted this rule, to the extent practicable, in accordance with the standards set forth 
in section 3(a) and 3(b)(2) of Executive Order 12988, to minimize litigation, eliminate 
ambiguity, and reduce burden.  The rule has no preemptive effect but does have some retroactive 
effect consistent with specific applicability provisions of the Economic Aid Act. 

60 
Executive Order 13132  
SBA has determined that this rule will not have substantial direct effects on the States, on the 
relationship between the National Government and the States, or on the distribution of power and 
responsibilities among the various layers of government.  Therefore, SBA has determined that 
this rule has no federalism implications warranting preparation of a federalism assessment.  
Paperwork Reduction Act, 44 U.S.C. Chapter 35  
SBA has determined that this rule will require revisions to existing recordkeeping or 
reporting requirements of the Paycheck Protection Program (PPP) information collection (OMB 
Control Number 3245-0407) as a result of amendments made to the PPP by the Economic Aid 
Act and implemented in this interim final rule.  The revisions will affect the PPP Loan 
Forgiveness Application Form 3508, PPP Loan Forgiveness Application Form 3508EZ, and PPP 
Loan Forgiveness Application Form 3508S.  
Further, to address the conflict of interest provisions in section 322 of the Economic Aid Act, 
SBA has developed a new form, Paycheck Protection Program--Borrower’s Disclosure of 
Certain Controlling Interests Form 3508D, which is required for certain borrowers who have 
disclosure requirements under the Economic Aid Act.   
SBA Form 3508S was amended to conform to section 307 of the Economic Aid Act, which 
requires a simplified forgiveness application for loans of not more than $150,000.  SBA Forms 
3508, 3508EZ and 3508S were also amended to address the new Second Draw PPP Loan 
program under section 311 of the Economic Aid Act, include the additional expenses that are 
eligible for forgiveness under section 304 of the Economic Aid Act, address the changes to the 
covered period definition in section 306 of the Economic Aid Act, and implement the EIDL 
advance deduction repeal in section 333 of the Economic Aid Act.  SBA Form 3508D will be 

61 
used by borrowers where a covered individual, as defined in section 322 of the Economic Aid 
Act, holds a controlling interest in the borrower. 
SBA has requested Office of Management and Budget (OMB) emergency approval of the 
revisions to the information collection  to enable borrowers to begin submitting loan forgiveness 
applications with the Economic Aid Act changes as quickly as possible and to enable borrowers 
with disclosure requirements to meet the statutory deadline for disclosure.    
 Regulatory Flexibility Act (RFA)  
The Regulatory Flexibility Act (RFA) generally requires that when an agency issues a 
proposed rule, or a final rule pursuant to section 553(b) of the APA or another law, the agency 
must prepare a regulatory flexibility analysis that meets the requirements of the RFA and publish 
such analysis in the Federal Register.  5 U.S.C. 603, 604.   
Rules that are exempt from notice and comment are also exempt from the RFA requirements, 
including conducting a regulatory flexibility analysis, when among other things the agency for 
good cause finds that notice and public procedure are impracticable, unnecessary, or contrary to 
the public interest.  SBA Office of Advocacy guide: How to Comply with the Regulatory 
Flexibility Act, Ch.1. p.9.  Since this rule is exempt from notice and comment, SBA is not 
required to conduct a regulatory flexibility analysis. 
Authority: 15 U.S.C. 636(a)(36); Coronavirus Aid, Relief, and Economic Security Act, Pub. L. 
116-136, section 1114 and Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues 
Act (Pub. L. 116-260), section 303. 
 
 
 
 
Jovita Carranza, 
 
 
 
 
 
Administrator  
 
 
 
 
 

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Small Business Administration. 
 
 
 
Michael Faulkender, 
Assistant Secretary for Economic Policy 
 
Department of the Treasury.

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