8/26/20 - Treasury, SBA Issue Additional PPP Guidance

On Monday, August 24, 2020, Treasury and SBA issued a new Interim Final Rule (IFR) with regard to the Paycheck Protection Program (PPP). The IFR deals with the treatment of owners and the eligibility of loan forgiveness of certain non-payroll costs.

Read more on the SBA site and download the Interim Final Rule

6/17/2020 - This guide has been updated to reflect the changes made by Congress to the PPP program to provide borrowers with more flexibility. These changes include:

• Extending the time to spend PPP funds from 8 weeks to 24 weeks;
• Lowering the amount that must be spent on payroll from 75% to 60%;
• Extending the deadline to restore FTEs and payroll from June 30, 2020 to Dec. 31, 2020; and
• Setting the repayment term for loans made after June 4, 2020 at five years.

The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.

The SBA and U.S. Department of Treasury are providing frequently updated guidance. Visit their page for the latest information below and FAQ for lenders and borrowers.

• For a top-line overview of the program CLICK HERE
• For the US Chamber of Commerce guide CLICK HERE
• If you’re a lender, more information can be found HERE
• If you’re a borrower, more information can be found HERE
• The application for borrowers can be found HERE

FAQs from the U.S. Senate Committee on Small Business & Entrepreneurship

Where can I apply for the Paycheck Protection Program?

You can apply for the Paycheck Protection Program (PPP) at any lending institution that is approved to participate in the program through the existing U.S. Small Business Administration(SBA) 7(a) lending program and additional lenders approved by the Department of Treasury. This could be the bank you already use or a nearby bank. There are thousands of banks that already participate in the SBA’s lending programs, including numerous community banks. You do not have to visit any government institution to apply for the program. You can call your bank or find SBA-approved lenders in your area through SBA’s online Lender Match tool. You can call your local Small Business Development Center or Women’s Business Center and they will provide free assistance and guide you to lenders.

Who is eligible for the loan?

You are eligible for a loan if you are a small business that employs 500 employees or fewer, or if your business is in an industry that has an employee-based size standard through SBA that is higher than 500 employees. In addition, if you are a restaurant, hotel, or a business that falls within the North American Industry Classification System (NAICS) code 72, “Accommodation and Food Services,” and each of your locations has 500 employees or fewer, you are eligible. Tribal businesses, 501(c)(19) veteran organizations, and 501(c)(3) nonprofits, including religious organizations, will be eligible for the program. Nonprofit organizations are subject to SBA’s affiliation standards. Independently owned franchises with under 500 employees, who are approved by SBA, are also eligible. Eligible franchises can be found through SBA’s Franchise Directory.

I am an independent contractor or gig economy worker, am I eligible?

Yes. Sole proprietors, independent contractors, gig economy workers, and self-employed individuals are all eligible for the Paycheck Protection Program.

What is the maximum amount I can borrow?

The amount any small business is eligible to borrow is 250 percent of their average monthly payroll expenses, up to a total of $10 million. This amount is intended to cover 24 weeks of payroll expenses and any additional amounts for making payments towards debt obligations. This 24 week period may be applied to any time frame between February 15, 2020, and June 30, 2020. Seasonal business expenses will be measured using a 12-week period beginning February 15, 2019, or March 1, 2019, whichever the seasonal employer chooses.

How can I use the money such that the loan will be forgiven?

The amount of principal that may be forgiven is equal to the sum of expenses for payroll, and existing interest payments on mortgages, rent payments, leases, and utility service agreements. Payroll costs include employee salaries (up to an annual rate of pay of $100,000), hourly wages and cash tips, paid sick or medical leave, and group health insurance premiums. If you would like to use the Paycheck Protection Program for other business-related expenses, like inventory, you can, but that portion of the loan will not be forgiven.

When is the loan forgiven?

The loan is forgiven at the end of the 24-week period after you take out the loan. Borrowers will work with lenders to verify covered expenses and the proper amount of forgiveness.

What is the covered period of the loan?

The borrower’s loan forgiveness will be reduced if the average number of weekly full-time equivalent employees (FTEs) during the 24-week period is less than the average number of FTEs during the borrowers chosen reference period. Borrowers can choose between the following
reference periods:

• February 15 to June 30, 2019
• January 1 to February 29, 2020
• In the case of a seasonal employer a consecutive 12-week period between May 1 and September 15, 2020

How much of my loan will be forgiven?

The process to calculate the amount of loan forgiveness requires three steps:

1. Determine the maximum amount of possible loan forgiveness based on the borrower’s expenditures during the 24 weeks after the loan is made;
2. Determine the amount, if any, by which the maximum loan forgiveness will be reduced because of reduced employment or reduced salaries and wages; and
3. Apply the 60% rule that requires that at least 60% of eligible loan forgiveness expenses go towards payroll costs

Am I responsible for interest on the forgiven loan amount?

No, if the full principal of the PPP loan is forgiven, the borrower is not responsible for the interest accrued in the 24-week covered period. The remainder of the loan that is not forgiven will operate according to the loan terms agreed upon by you and the lender.

What are the interest rate and terms for the loan amount that is not forgiven?

The terms of the loan not forgiven may differ on a case-by-case basis. However, the maximum terms of the loan feature a 10-year term with interest capped at 4 percent and a 100 percent loan guarantee by the SBA. You will not have to pay any fees on the loan, and collateral requirements and personal guarantees are waived. Loan payments will be deferred for at least six months and up to one year starting at the origination of the loan.

When is the application deadline for the Paycheck Protection Program?

Applicants are eligible to apply for the PPP loan until December 31, 2020.

I took out a bridge loan through my state, am I eligible to apply for the Paycheck Protection Program?

Yes, you can take out a state bridge loan and are still be eligible for the PPP loan.

If I have applied for or received an Economic Injury Disaster Loan (EIDL) related to COVID-19 before the Paycheck Protection Program became available, will I be able to refinance into a PPP loan?

Yes. If you received an EIDL loan related to COVID-19 between January 31, 2020, and the date at which the PPP becomes available, you would be able to refinance the EIDL into the PPP for loan forgiveness purposes. However, you may not take out an EIDL and a PPP for the same purposes. Remaining portions of the EIDL, for purposes other than those laid out in loan forgiveness terms for a PPP loan, would remain a loan. If you took advantage of an emergency CDL grant award of up to $10,000, that amount would be subtracted from the amount forgiven under PPP.