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Paycheck Protection Program Loans Move Forward SBA/Treasury Department Issue Guidance

April 3, 2020

On March 31, the Treasury Department and Small Business Administration (SBA) released initial guidance and a sample application form for the Paycheck Protection Program (PPP). The PPP was enacted as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES), which was signed by President Trump on March 27. Yesterday, the Treasury Department issued more detailed interim regulations. (will send PDF to link to the words interim regulations).

The program is expected to start accepting applications today. Due to the expected rush for funding, companies are encouraged to patiently work with their lending institutions  to provide the required information and complete the loan form. Keep in mind that the process is still being fine-tuned. Small businesses and sole proprietors can apply starting today, April 3. Independent contractors and individuals who are self-employed can apply for loans starting April 10.

The program is targeted to provide loans to small businesses with 500 or fewer employees whose operations have been hit hard by the coronavirus. Loan amounts will be forgiven as long as the funds are used to cover payroll costs, mortgage interest, rent, and utility costs over the eight week period after the loan is made; and employee

and compensation levels are maintained. The guidance specifies that due to likely high subscription rates, “it is anticipated that 25% or less of the amount eligible for loan forgiveness will be permitted to be used for payments of mortgage interest, rent and utilities (i.e. at least 75% must go to cover payroll costs). Your lender can provide more detailed information on loan forgiveness eligibility. 

While this initial guidance provides more specifics about how the PPP loans will be issued, there are still a number of unanswered questions about the program. For instance, it is unclear whether current SBA affiliation rules will be changed to ensure that small businesses owned or controlled by private equity funds are eligible to participate. See article below.

We expect the SBA to continue to issue further clarifications as the loan program gets underway, so interested borrowers should consult with their local lenders directly about any changes.

Additional resources from the SBA and Treasury Department are provided below: