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FAQ: Do PPP loans count as "outstanding debt" for purposes of Main Street? (2020-10-30)

Summary

Main Street lending program FAQ G.16, October 30, 2020, asks whether PPP loans count as outstanding debt. It states that Eligible Lenders and Eligible Borrowers may exclude PPP debt from existing outstanding and undrawn available debt when the borrower and its affiliates received PPP loans totaling less than $2 million. A borrower that has applied for forgiveness may exclude the Forgiveness Amount reported on Line 11 of SBA Form 3508, Line 8 of Form 3508EZ, or Form 3508S; one that has not may exclude the amount its principal executive officer believes in good faith will be forgiven. Borrowers with PPP loans of $2 million or more may not exclude them unless SBA has determined they are eligible for forgiveness. The borrower must give its lender supporting forms.

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Full text

G.16. Do PPP loans count as “outstanding debt” for purposes of Main Street?
When computing “existing outstanding and undrawn available debt” for purposes of
determining the maximum allowable loan amount under Main Street, Eligible Lenders and
Eligible Borrowers may exclude PPP debt, as set out in (A) and (B) below, provided that the
Eligible Borrower, together with its affiliates (as defined for purposes of the PPP), received PPP
loans with original principal amounts totaling less than $2 million. Under such circumstances,
the following may be excluded from the “existing outstanding and undrawn available debt”
calculation:
    A. If the Eligible Borrower has applied for forgiveness of its PPP loan, the “Forgiveness
       Amount” as reported by the Eligible Borrower on Line 11 of the SBA’s Form 3508, on
       Line 8 of Form 3508EZ, or on Form 3508S, as applicable, may be excluded, except to the
       extent the Eligible Borrower’s PPP lender or SBA has determined that such amount is
       ineligible for forgiveness.
    B. If the Eligible Borrower has not yet applied for forgiveness of its PPP loan, the amount
       of its PPP loan that its principal executive officer has a reasonable, good-faith basis to
       believe will be forgiven in accordance with applicable PPP requirements, after review of
       the SBA’s Form 3508, Form 3508EZ, or Form 3508S, as applicable, including the relevant
       instructions, may be excluded.
For the avoidance of doubt, an Eligible Borrower that, together with its affiliates (as defined for
purposes of the PPP), received PPP loans with original principal amounts totaling $2 million or
more, may not exclude any of the outstanding portion of such loans from “existing outstanding
and undrawn available debt,” except to the extent that the SBA has actually determined that
such loans are eligible for forgiveness.
Each Eligible Borrower seeking to exclude some or all of its PPP debt from the calculation of
“existing outstanding and undrawn available debt” as provided by this FAQ must, during the
Main Street loan underwriting process, provide its Eligible Lender with either (i) a copy of the
PPP loan forgiveness application form (SBA Form 3508, 3508EZ, or 3508S) the Eligible Borrower
has already completed and submitted to its PPP lender or lender servicing its PPP loan (which
may be the same as the Eligible Lender), or (ii) a completed and signed version of the Exclusion
of PPP Loan from Main Street “Outstanding Debt” form, as applicable.
If the PPP lender or SBA has determined that all or part of an Eligible Borrower’s PPP loan is not
forgivable prior to the submission of a Main Street loan to the Main Street Portal, the portion of
the PPP loan that the PPP lender or SBA has determined is not forgivable must be included in
the “existing outstanding and undrawn available debt” calculation. For the avoidance of doubt,
Eligible Lenders and Eligible Borrowers may exclude 100% of the amount of any PPP loan that
SBA has determined is eligible for forgiveness.
This framework for excluding an Eligible Borrower’s PPP loan from the Main Street “existing
outstanding and undrawn available debt” calculation reflects the Federal Reserve’s and
Treasury’s intention to support lending to PPP borrowers that are otherwise eligible to borrow
under Main Street, but may not receive the SBA’s PPP loan forgiveness decisions by the time of
their Main Street loans. It does not reflect any forecast or assessment of the actual expected
amount of PPP loan forgiveness for any PPP borrowers. 1




1
 Certain Businesses that meet the Eligible Borrower requirements may not be approved for a loan or receive the
maximum allowable amount. See question I.2.

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