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SBA Provides Clarification for Lenders and Borrowers


The Small Business Administration (SBA) has recently issued guidance to clarify what is included in group health care benefits, Economic Injury Disaster Loans (EIDL) advance and the impact on Paycheck Protection Program (PPP) forgiveness, owner-employee compensation, eligibility of certain rental and mortgage interest payment, and related-party rent.

On August 11, 2020, the SBA updated their Frequently Asked Questions (FAQ) to include the following clarifications:

  • Group health care benefits include insurance premiums for dental and vision.
  • EIDL advance impact on PPP forgiveness.
    • SBA is required to reduce the forgiveness amount by the amount of the EIDL advance
    • Any remaining loan amount must be repaid by the borrower
      • The lender will notify the borrower of the loan amount along with the date the first loan payment is due.
      • The lender will continue to service the loan, not the SBA.
      • If a borrower is determined to have been ineligible for a PPP loan, the SBA will seek repayment of the outstanding balance.
    • If the amount of the EIDL advance is greater than the amount of the PPP loan, the borrower will not receive any PPP forgiveness.

A full copy of the SBA FAQ can be found at:

On August 24, 2020, the SBA issued “PPP Interim Final Rule – Treatment of Owners and Forgiveness of Certain Nonpayroll Costs” which provides details of the interim guidance. Here are some key highlights:

  • Owners with less than 5% ownership in a C or S Corporation are not subject to the owner-employee compensation rules.  These rules limit owner’s compensation eligible for forgiveness to $15,385 over an 8-week forgiveness period or $20,833 over a 24-week forgiveness period.
  • The amount of loan forgiveness requested for nonpayroll costs may not include any amount attributable to the business operation of a tenant or subtenant of the PPP borrower or, for the home-based businesses, household expenses.
    • A borrower sub-leases space, they may claim the net rent expense for forgiveness. 

Example, if a borrower rents space for $10,000 a month and sub-leases a portion of the space for $2,500 a month, only $7,500 per month of rent is eligible for forgiveness.

    • A borrower has a mortgage on their space and rents a portion of the space to another business, the borrower may claim only their proportionate share of the mortgage interest for forgiveness. 

Example, a borrower has a mortgage and leases 25% of their space to another business, the borrower may claim 75% of mortgage interest for forgiveness.

    • If the borrower shares office space with another business, the borrower must prorate rent and utilities based in the same manner as the borrower’s 2019 tax filing.  If the borrower is a new business, use the expected 2020 tax filings.
    • If the borrower is working out of their home, 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.
  • Rent payments to a related party are eligible for forgiveness as long as the following conditions are met:
    • The amount of rent forgiveness requested is no more than the amount of mortgage interest owed on the property during the covered period.
    • The lease/mortgage was entered into prior to February 15, 2020.
    • Mortgage interest to a related party is not eligible for forgiveness.

If you need assistance or have any questions on the information in this article, please call your CironeFriedberg professional.  You can reach us by phone at (203) 798-2721 (Bethel), (203) 366-5876 (Shelton), or (203) 359-1100 (Stamford), or email us at

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CironeFriedberg, LLP
CironeFriedberg, LLP
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