Overnight, on March 31, the SBA and the US Treasury issued simple guidelines and instructions and the application form for the brand new Paycheck Protection Program (PPP) that was signed into law on Friday, March 27, 2020 (5 days ago) as part of the CARES ACT.
Links to the relevant, updated US Treasury documents are included below.
Below are some highlights:
The Paycheck Protection Program (“PPP”) authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis.
All loan terms will be the same for everyone.
The loan amounts will be forgiven as long as:
- The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8 week period after the loan is made; and
- Employee and compensation levels are maintained. Payroll costs are capped at $100,000 on an annualized basis for each employee.
Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.
Loan payments will be deferred for 6 months.
Where and When can I apply?
- Starting April 3, 2020, small businesses and sole proprietorships started applying for and receiving loans to cover their payroll and other certain expenses through existing SBA lenders.
- Starting April 10, 2020, independent contractors and self-employed individuals can apply for and receive loans to cover their payroll and other certain expenses through existing FDIC insured institutions.
- Other regulated lenders will be available to make these loans as soon as they are approved and enrolled in the program.
- You can apply through any existing SBA lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating.
When is my loan due? In 2 years.
Can I pay my loan earlier than 2 years? Yes. There are no prepayment penalties or fees.
Do I need to pledge any collateral for these loans? No. No collateral is required.
Do I need to personally guarantee this loan? No. There is no personal guarantee requirement.
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However, if the proceeds are used for fraudulent purposes, the U.S. government will pursue criminal charges against you.
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What do I need to certify? As part of your application, you need to certify in good faith that:
- Current economic uncertainty makes the loan necessary to support your ongoing operations.
- The funds will be used to retain workers and maintain payroll or to make mortgage, lease, and utility payments.
- You have not and will not receive another loan under this program.
- You will provide to the lender documentation that verifies the number of full-time equivalent employees on payroll and the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight weeks after getting this loan.
- Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.
- All the information you provided in your application and in all supporting documents and forms is true and accurate. Knowingly making a false statement to get a loan under this program is punishable by law.
- You acknowledge that the lender will calculate the eligible loan amount using the tax documents you submitted.
- You affirm that the tax documents are identical to those you submitted to the IRS. And you also understand, acknowledge, and agree that the lender can share the tax information with the SBA’s authorized representatives, including authorized representatives of the SBA Office of Inspector General, for the purpose of compliance with SBA Loan Program Requirements and all SBA reviews.”
If you have additional questions call us at (800) 232-3584.
The following are links to the PPP, Paycheck Protection Program. The application period opened on April 3.
PPP Program Borrower Information Sheet: (PPP) INFORMATION SHEET
PPP Program Overview: SMALL BUSINESS PAYCHECK PROTECTION PROGRAM
PPP Program Lender Information Sheet: (PPP) INFORMATION SHEET LENDERS
PPP Program Application Form: PAYCHECK PROTECTION PROGRAM BORROWERS APPLICATION