More late Friday guidance on the Paycheck Protection Program loans was issued by the SBA on June 12, with a second set of Paycheck Protection Program Flexibility Act (PPPFA) interim final rules (IFRs).[1] As with the first set, this guidance makes changes to the original April 2, 2020 IFR released shortly after the CARES Act.

Eligibility Requirements

Originally the IFR had held that a PPP loan could not be approved if any 20% or greater owner of the business had been convicted of a felony within the past five years. Treasury has now decided to limit that prohibition to only a subset of felonies for that period, with a complete bar only for other felony convictions in the past year. The IFR provides:

After further consideration, the Administrator, in consultation with the Secretary of the Treasury (the Secretary), has determined that a shorter timeframe for felonies that do not involve fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance is more consistent with Congressional intent to provide relief to small businesses and also promotes the important policies underlying the First Step Act of 2018 (Pub. L. 115-391).[2]

Part III.2.b.iii. of the First Interim Final Rule is now modified to provide that a borrower is ineligible for a PPP loan if:

…

iii. An owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony involving fraud, bribery, embezzlement, or a false statement in a loan application or an application for federal financial assistance within the last five years or any other felony within the last year;…[3]