The Small Business Administration (SBA) has released guidance and procedures with regards to borrowers who have received Paycheck Protection Program (PPP) loans and Economic Injury Disaster Grants (EIDL).
The CAREs Act was signed into law on March 27, 2020, and it required that the amount received by any EIDL Grant be deducted from PPP loan forgiveness calculations. This requirement was then repealed in the Consolidated Appropriations act, which was signed into law on December 27, 2020.
In accordance with the new law, the SBA issued a notice stating that they will no longer deduct EIDL advances from forgiveness payments remitted to PPP lenders. This applies to loans made on or after December 29, 2020.
If the SBA has already remitted a forgiveness payment to a PPP lender, and that payment was reduced by an EIDL Advance, the SBA will automatically remit a reconciliation payment to the PPP lender for the previously-deducted EIDL.
It is the responsibility of the PPP lender to notify the borrower of the reconciliation payment. The PPP lender is also responsible for re-amortizing the loan and notifying the borrower of the amount of the next payment due, or notifying the borrower that the loan has been paid in full, whichever is applicable.
If the amount remitted by the SBA to the PPP lender exceeds the remaining principle balance of the loan (because the borrower made a payment on the loan), the PPP lender must remit the excess amount to the borrower, including the accrued interest paid by the borrower.
