CARES ACT (Part 1): Paycheck Protection Program UPDATED

07
Apr 2020
CARES ACT (Part 1): Paycheck Protection Program UPDATED

On March 27, 2020, the ‘‘Coronavirus Aid, Relief, and Economic Security Act’’ or the ‘‘CARES Act’’ (link) become law.  

The law is over 800 pages long and carries a price tag of $2 trillion.  This stimulus package contains provisions for a small business loan package, increased unemployment benefits, recovery rebates for individuals, a small business payroll tax credit, student loans, revisions to the recently passed Emergency Paid Sick Leave Act, changes to the tax law, loosening the laws governing retirement funds, assistance for airlines, direct cash injections for mid and large businesses, support for states, tribes and municipalities, support for healthcare (addressing medical products, medical devices, drug shortages, testing, health care providers, telehealth, rural health, Indian Health, Medicare, Medicaid, public health, over the counter drugs, and other areas), and increases in funding for nearly every Federal Agency.

The Department of Treasury issued an Interim Final Rule on April 2, 2020.  This rule clarifies (and changes) certain provisions of the law.  These are shown in red.

The Department of Treasury issued Frequently Asked Questions on April 6, 2020.  These FAQs clarify certain provisions of the law, but do not carry the force and effect of law independent of the statute and regulations on which they are based.These are shown in gold.

 

“Keeping American Worker’s Paid and Employed Act” (§ 1101-1114 of the Act)

The Paycheck Protection Program

  • 100% guaranteed by SBA. Confirmed by the Rule.
  • Loans available 2/15/2020 through 6/30/2020
  • Money is first come, first served
  • $349,000,000,000 available ($349 BILLION)

 

Eligible entities

  • Small business concerns, business concerns, nonprofit organizations, veterans organizations, or Tribal business concerns who employ not more than 500 employees or SBA standard for industry
    • Employees include full time, part-time and other basis 
    • mall business concerns can be eligible borrowers even if they have more than 500 employees, as long as they satisfy the existing statutory and regulatory definition of a “small business concern” under section 3 of the Small Business Act, 15 U.S.C. 632. A business can qualify if it meets the SBA employee-based or revenue-based size standard corresponding to its primary industry. Go to www.sba.gov/size for the industry size standards.  Go to www.sba.gov/size for the industry size standard
    • a business can qualify for the Paycheck Protection Program as a small business concern if it met both tests in SBA’s “alternative size standard” as of March 27, 2020: (1) maximum tangible net worth of the business is not more than $15 million; and (2) the average net income after Federal income taxes (excluding any carry-over losses) of the business for the two full fiscal years before the date of the application is not more than $5 million.
    • A business that qualifies as a small business concern under section 3 of the Small Business Act, 15 U.S.C. 632, may truthfully attest to its eligibility for PPP loans on the Borrower Application Form, unless otherwise ineligible.
  • Individuals who operate under a sole proprietorship or as an independent contractor and eligible self-employed individuals
  • Accommodation or food service businesses that employ not more than 500 employees per physical location
  • Affiliation rules are waived for accommodation or food service businesses and franchises
    • SBA intends to promptly issue additional guidance with regard to the applicability of affiliation rules at 13 CFR §§ 121.103 and 121.301 to PPP loans
    • It is the responsibility of the borrower to determine which entities (if any) are its affiliates and determine the employee headcount of the borrower and its affiliates. Lenders are permitted to rely on borrowers’ certifications.
    • Borrowers must apply the affiliation rules set forth in SBA’s Interim Final Rule on Affiliation. A borrower must certify on the Borrower Application Form that the borrower is eligible to receive a PPP loan, and that certification means that the borrower is a small business concern as defined in section 3 of the Small Business Act (15 U.S.C. 632), meets the applicable SBA employee-based or revenue-based size standard, or meets the tests in SBA’s alternative size standard, after applying the affiliation rules, if applicable. SBA’s existing affiliation exclusions apply to the PPP, including, for example the exclusions under 13 CFR 121.103(b)(2).
    • If a minority shareholder in a business irrevocably waives or relinquishes any existing rights specified in 13 C.F.R. 121.301(f)(1), the minority shareholder would no longer be an affiliate of the business (assuming no other relationship that triggers the affiliation rules).

 

    • Companies receiving assistance from Small Business Investor Company
      • You are ineligible for a PPP loan if, for example:
        • You are engaged in any activity that is illegal under federal, state, or local law;
        • You are a household employer (individuals who employ household employees such as nannies or housekeepers)
        • An owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony within the last five years; 
          • Businesses are only ineligible if an owner of 20 percent or more of the equity of the applicant is presently incarcerated, on probation, on parole; subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or, within the last five years, for any felony, has been convicted; pleaded guilty; pleaded nolo contendere; been placed on pretrial diversion; or been placed on any form of parole or probation (including probation before judgment). 
        • You, or any business owned or controlled by you or any of your owners, has ever obtained a direct or guaranteed loan from SBA or any other Federal agency that is currently delinquent or has defaulted within the last seven years and caused a loss to the government.
  • Businesses that are not eligible for PPP loans are identified in 13 CFR 120.110 and described further in SBA’s Standard Operating Procedure (SOP) 50 10, Subpart B, Chapter 2, except that nonprofit organizations authorized under the Act are eligible.
  • Only one PPP loan for eligible entity

 

Broad Approval Requirements

  • In operation on 2/15/2020
    • In evaluating a borrower’s eligibility, a lender may consider whether a seasonal borrower was in operation on February 15, 2020 or for an 8-week period between February 15, 2019 and June 30, 2019.
  • Had employees for whom the borrower paid salaries and payroll taxes; or
  • Paid independent contractors, as reported on a Form 1099–MISC
  • You are also eligible for a PPP loan if you are an individual who operates under a sole proprietorship or as an independent contractor or eligible self- employed individual, you were in operation on February 15, 2020.
  • e-signature or e-consents can be used regardless of the number of owners 
  • Borrowers can accept signatures from individual authorized to sign on behalf of the borrower.  However, the borrower should bear in mind that, as the Borrower Application Form indicates, only an authorized representative of the business seeking a loan may sign on behalf of the business. An individual’s signature as an “Authorized Representative of Applicant” is a representation to the lender and to the U.S. government that the signer is authorized to make the certifications, including with respect to the applicant and each owner of 20% or more of the applicant’s equity, contained in the Borrower Application Form. Lenders may rely on that representation and accept a single individual’s signature on that basis.

 

Borrower Requirements

  • Good Faith Certification (on application)
    • The applicant was in operation on February 15, 2020 and had employees for whom it paid salaries and payroll taxes or paid independent contractors, as reported on a Form 1099-MISC;
    • that uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the eligible recipient;
    • acknowledging that funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments;
    • Documentation verifying the number of full-time equivalent employees on payroll as well as the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight week period following this loan will be provided to the lender;
    • Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities. As explained above, not more than 25 percent of the forgiven amount may be for non-payroll costs;
    • does not have an application pending for a loan under this subsection for the same purpose and duplicative of amounts applied for or received under a covered loan;
    • has not received amounts under this subsection for the same purpose and duplicative of amounts applied for or received under a covered loan during the period beginning on 2/15/2020 and ending on 12/31/2020;
    • that the information provided in this application and the information provided in all supporting documents and forms is true and accurate in all material respects. I understand that knowingly making a false statement to obtain a guaranteed loan from SBA is punishable under the law, including under 18 USC 1001 and 3571 by imprisonment of not more than five years and/or a fine of up to $250,000; under 15 USC 645 by imprisonment of not more than two years and/or a fine of not more than $5,000; and, if submitted to a federally insured institution, under 18 USC 1014 by imprisonment of not more than thirty years and/or a fine of not more than $1,000,000;
    • that the lender will confirm the eligible loan amount using tax documents I have submitted. I affirm that these tax documents are identical to those submitted to the Internal Revenue Service. I also understand, acknowledge, and agree that the Lender can share the tax information with 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.
  • the requirement that a small business concern is unable to obtain credit elsewhere does not apply 
  • can be combined with economic injury disaster loan under 7(b)(2)

 

  • For loans made under the PPP, SBA will not require the lenders to comply with section 120.150 “What are SBA’s lending criteria?.” SBA will allow lenders to rely on certifications of the borrower in order to determine eligibility of the borrower and use of loan proceeds and to rely on specified documents provided by the borrower to determine qualifying loan amount and eligibility for loan forgiveness. Lenders must comply with the applicable lender obligations set forth in this interim final rule, but will be held harmless for borrowers’ failure to comply with program criteria; remedies for borrower violations or fraud are separately addressed in this interim final rule. The program requirements of the PPP identified in this rule temporarily supersede any conflicting Loan Program Requirement (as defined in 13 CFR 120.10.
  • You must also submit such documentation as is necessary to establish eligibility such as payroll processor records, payroll tax filings, or Form 1099- MISC, or income and expenses from a sole proprietorship. For borrowers that do not have any such documentation, the borrower must provide other supporting documentation, such as bank records, sufficient to demonstrate the qualifying payroll amount.

 

Maximum loan amount

  • 2 ½ months of average total monthly payroll costs during prior one-year period
    • Special rules for seasonal employers
    • Special rules for a new business less than 1 year old
    • In general, borrowers can calculate their aggregate payroll costs using data either from the previous 12 months or from calendar year 2019. For seasonal businesses, the applicant may use average monthly payroll for the period between February 15, 2019, or March 1, 2019, and June 30, 2019. An applicant that was not in business from February 15, 2019 to June 30, 2019 may use the average monthly payroll costs for the period January 1, 2020 through February 29, 2020.
    • Borrowers may use their average employment over the same time periods to determine their number of employees, for the purposes of applying an employee-based size standard. Alternatively, borrowers may elect to use SBA’s usual calculation: the average number of employees per pay period in the 12 completed calendar months prior to the date of the loan application (or the average number of employees for each of the pay periods that the business has been operational, if it has not been operational for 12 months).
  • The Rule contains a methodology to determine the maximum payroll amount:

Step 1: Aggregate payroll costs (defined in detail below in f.) from the last twelve months for employees whose principal place of residence is the United States,

Step 2: Subtract any compensation paid to an employee in excess of an annual salary of $100,000 and/or any amounts paid to an independent contractor or sole proprietor in excess of $100,000 per year.

Step 3: Calculate average monthly payroll costs (divide the amount from Step 2 by 12).

Step 4: Multiply the average monthly payroll costs from Step 3 by 2.5.

Step 5: Add the outstanding amount of an Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020, less the amount of any “advance” under an EIDL COVID-19 loan (because it does not have to be repaid).

  • Outstanding amount of any (b)(2) loans made beginning on 1/31/2020
  • Maximum loan of $10 million Confirmed by the Rule

 

 

 

Recommended paperwork for application

Documentation required for a loan as shown on the application includes:

  1. 2019 IRS Quarterly 940, 941 or 944 payroll tax reports.
  2. Last 12 months of Payroll Reports beginning with your last payroll date and going backwards 12 months showing:
    1. Gross wages for each employee, including the officer(s) if paid W-2 wages
    2. Paid time off for each employee
    3. Vacation pay for each employee
    4. Family medical leave pay for each employee
    5. State and Local taxes assessed on the employee’s compensation for each employee
  3. 1099s for 2019 for independent contractors that would otherwise be an employee of your business
    1. Do NOT include 1099s for services.
  4. Documentation showing total of all health insurance premiums paid by the Company Owner under a group health plan.
    1. Include all employees and the company owners.
  5. Document the sum of all retirement plan funding that was paid by the Company Owner (do not include funding that came from the employee’s out of their paycheck deferrals
    1. Include all employees, including company owners.
    2. 401K plans, Simple IRA, SEP IRAs.

 

Payroll costs are 

  • salary, wage or commission 
    • does not include salary at rate of over $100K per year
      • The exclusion of compensation in excess of $100,000 annually applies only to cash compensation, not to non-cash benefits, including:
        • employer contributions to defined-benefit or defined-contribution retirement plans;
        • payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums; and
        • payment of state and local taxes assessed on compensation of employees.
    • does not include certain taxes
    • does not include employees with principal place of residence outside of the United States
    • includes payroll costs, including costs for employee vacation, parental, family, medical, and sick leave.
    • the CARES Act excludes qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act (Public Law 116–127).
    • does not include qualified sick leave with credit under the Families First Coronavirus Response Act
    • does not include qualified family leave with credit under the Families First Coronavirus Response Act
  • payment of cash tips, 
  • dismissal/separation analysis
  • group healthcare benefits
  • retirement benefits
  • state or local tax on compensation
  • also the sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in 1 year, as pro-rated for the covered period
  • Payroll costs consist of compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement; payment of state and local taxes assessed on compensation of employees; and for an independent contractor or sole proprietor, wage, commissions, income, or net earnings from self-employment or similar compensation.
  • Excludes:
    • Any compensation of an employee whose principal place of residence is outside of the United States;
    • The compensation of an individual employee in excess of an annual salary of $100,000, prorated as necessary;
    • Federal employment taxes imposed or withheld between February 15, 2020 and June 30, 2020, including the employee’s and employer’s share of FICA (Federal Insurance Contributions Act) and Railroad Retirement Act taxes, and income taxes required to be withheld from employees; and
    • Qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act (Public Law 116–127).
  • Any amounts that an eligible borrower has paid to an independent contractor or sole proprietor should be excluded from the eligible business’s payroll costs. However, an independent contractor or sole proprietor will itself be eligible for a loan under the PPP, if it satisfies the applicable requirements.
  • Under the Act, payroll costs are calculated on a gross basis without regard to (i.e., not including subtractions or additions based on) federal taxes imposed or withheld, such as the employee’s and employer’s share of Federal Insurance Contributions Act (FICA) and income taxes required to be withheld from employees. As a result, payroll costs are not reduced by taxes imposed on an employee and required to be withheld by the employer, but payroll costs do not include the employer’s share of payroll tax. For example, an employee who earned $4,000 per month in gross wages, from which $500 in federal taxes was withheld, would count as $4,000 in payroll costs. The employee would receive $3,500, and $500 would be paid to the federal government. However, the employer-side federal payroll taxes imposed on the $4,000 in wages are excluded from payroll costs under the statute.
  • SBA recognizes that eligible borrowers that use PEOs or similar payroll providers are required under some state registration laws to report wage and other data on the Employer Identification Number (EIN) of the PEO or other payroll provider. In these cases, payroll documentation provided by the payroll provider that indicates the amount of wages and payroll taxes reported to the IRS by the payroll provider for the borrower’s employees will be considered acceptable PPP loan payroll documentation. Relevant information from a Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, attached to the PEO’s or other payroll provider’s Form 941, Employer’s Quarterly Federal Tax Return, should be used if it is available; otherwise, the eligible borrower should obtain a statement from the payroll provider documenting the amount of wages and payroll taxes. In addition, employees of the eligible borrower will not be considered employees of the eligible borrower’s payroll provider or PEO.

 

Independent Contractors

  • Independent contractors have the ability to apply for a PPP loan on their own, so they do not count for purposes of a borrower’s PPP loan calculation.

 

Allowable uses

  • existing allowable uses for 7(a) loans 
    • the Administrator believes that finite appropriations and the structure of the Act warrant a requirement that borrowers use a substantial portion of the loan proceeds for payroll costs, consistent with Congress’ overarching goal of keeping workers paid and employed
  • payroll costs
    • must be at least 75% used for payroll
  • costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums
  • employee salaries, commissions, or similar compensations
  • payments of interest on mortgage, but not payment of principal)
  • rent
  • utilities
  • interest on other debt obligations incurred before the covered period
  • if misused: SBA will direct you to repay those amounts. If you knowingly use the funds for unauthorized purposes, you will be subject to additional liability such as charges for fraud. If one of your shareholders, members, or partners uses PPP funds for unauthorized purposes, SBA will have recourse against the shareholder, member, or partner for the unauthorized use.

 

Forgiveness

  • For 8 weeks beginning on date of origination of loan 
  • (4/8 update) The eight-week period begins on the date the lender makes the first disbursement of the PPP loan to the borrower. The lender must make the first disbursement of the loan no later than ten calendar days from the date of loan approval.
    • Payroll costs
    • Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums
    • Payment of mortgage interest (not principal)
    • Payment of rent
    • Utility payments (electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020)
  • Considered cancelled indebtedness
  • Reduced if employees or wages are reduced
    • Forgiveness amount is reduced by a formula based on the reduction in number of FTE employees during the 8 week covered period after origination
    • Employer chooses reference period (2/15/2019-6/30/2019 or 1/1/2020-2/29/2020)
    • Only reduced if greater than 25% loss of FTE
    • Special rules for seasonal employees
    • Average per pay period
    • No reduction if rehired or wages return by 6/30/2020
  • Wages paid to tipped employees included 
  • De minimis exception
  • Excluded from gross income for tax purposes
  • Forgiveness of non-payroll expenses will be capped at 25%
  • SBA will issue additional guidance on loan forgiveness 

 

Application for Forgiveness

  • Documentation verifying FTE and pay rates 
    • Payroll tax filings to IRS
    • State income, payroll, and unemployment insurance filings
    • cancelled checks, payment receipts, transcripts of accounts, or other documents verifying payments on covered mortgage obligations, payments on covered lease obligations, and covered utility payments
    • Certification for repetitive of borrower that information is correct and was used to retain employees, make mortgage interest payments, pay rent or pay utilities
  • Must have documentation
  • Decision made in 60 days
  • The amount of loan forgiveness can be up to the full principal amount of the loan and any accrued interest

 

Maturity after forgiveness

  • remaining balance continues to be guaranteed
  • covered loan with maximum maturity of 10 years Regulations set maturity at 2 years.
  • interest rate less than 4%. Treasury initially set the interest rate at 0.5% but on 4/2/2020 raised the rate to 100 basis points or one per after banks protested.
  • no prepayment penalty
  • Loan deferment 
    • Presumed to have been adversely impacted
    • Deferment relief for 6 months to 1 year
      • You will not have to make any payments for six months following the date of disbursement of the loan. However, interest will continue to accrue on PPP loans during this six-month deferment
    • Applies to loans sold on secondary market

Non-recourse

  • any individual shareholder, member, or partner of an eligible recipient of a covered loan for non-payment of any covered loan,
  • except to the extent that such shareholder, member, or partner uses the covered loan proceeds for a purpose not authorized
  • No personal guarantee confirmed
  • No collateral confirmed

 

Lenders

  • delegates approval authority to lender
  • Each lender shall:
    • Confirm receipt of borrower certifications in application; but do not have to replicate every calculation
      • Providing an accurate calculation of payroll costs is the responsibility of the borrower, and the borrower attests to the accuracy of those calculations on the Borrower Application Form. Lenders are expected to perform a good faith review, in a reasonable time, of the borrower’s calculations and supporting documents concerning average monthly payroll cost. For example, minimal review of calculations based on a payroll report by a recognized third-party payroll processor would be reasonable. In addition, as the PPP Interim Final Rule indicates, lenders may rely on borrower representations, including with respect to amounts required to be excluded from payroll costs.
        If the lender identifies errors in the borrower’s calculation or material lack of substantiation in the borrower’s supporting documents, the lender should work with the borrower to remedy the issue.
    • Confirm receipt of information demonstrating that a borrower had employees for whom the borrower paid salaries and payroll taxes on or around February 15, 2020;
    • Confirm the dollar amount of average monthly payroll costs for the preceding calendar year by reviewing the payroll documentation submitted with the borrower’s application;
    • Follow BSA Requirements
      • If federally insured depository institutions and federally insured credit unions eligible to participate in the PPP program have not yet collected beneficial ownership information on existing customers, such institutions do not need to collect and verify beneficial ownership information for those customers applying for new PPP loans, unless otherwise indicated by the lender’s risk-based approach to BSA compliance.
  • Each lender’s underwriting obligation under the PPP is limited to the items above and reviewing the “Paycheck Protection Application Form.”
  • Lenders may use their own online systems and a form they establish that asks for the same information (using the same language) as the Borrower Application Form. Lenders are still required to send the data to SBA using SBA’s interface.
  • Borrowers must submit such documentation as is necessary to establish eligibility such as payroll processor records, payroll tax filings, or Form 1099-MISC, or income and expenses from a sole proprietorship. 

  • For borrowers that do not have any such documentation, the borrower must provide other supporting documentation, such as bank records, sufficient to demonstrate the qualifying payroll amount. 

  • Initially eligible lenders:
    • All SBA 7(a) lenders are automatically approved to make PPP loans on a delegated basis.

 

  • extended to additional lenders determined by the Administrator and the Secretary of the Treasury to have the necessary qualifications to process, close, disburse and service loans made with the guarantee of the Administration.  The Administrator and the Secretary have jointly determined that authorizing additional lenders is necessary to achieve the purpose of allowing as many eligible borrowers as possible to receive loans by the June 30, 2020 deadline.

 

  • With transmission of a CARES Act Section 1102 Lender Agreement (SBA Form 3506) the following types of lenders have been determined to meet the criteria and are eligible to make PPP loans unless they currently are designated in Troubled Condition by their primary federal regulator or are subject to a formal enforcement action with their primary federal regulator that addresses unsafe or unsound lending practices:
    • Any federally insured depository institution or any federally insured credit union;
    • Any Farm Credit System institution;
    • Any depository or non-depository financing provider that originates, maintains, and services business loans or other commercial financial receivables and participation interests; has a formalized compliance program; applies the requirements under the BSA as a federally regulated financial institution, or the BSA requirements of an equivalent federally regulated financial institution; has been operating since at least February 15, 2019, and has originated, maintained, and serviced more than $50 million in business loans or other commercial financial receivables during a consecutive 12 month period in the past 36 months, or is a service provider to any insured depository institution that has a contract to support such institution’s lending activities in accordance with 12 U.S.C. § 1867(c) and is in good standing with the appropriate Federal banking agency.

 

  • loans can be sold in secondary market after fully disbursed at premium or discount to par value
  • SBA will issue guidance regarding any advance purchase for loans sold in the secondary market
  • Do not need to apply the credit elsewhere test
  • has zero risk weight
  • an insured depository institution or an insured credit union that modifies a covered loan in relation to COVID–19-related difficulties in a troubled debt restructuring on or after March 13, 2020, shall not be required to comply with Receivables-Troubled Restructurings by Creditors’
  • SBA will reimburse lender for processing within 5 days after disbursement: (confirmed amounts)
    • 5% of loans below $350,000
    • 3% of loans of $350,000 to $2,000,000
    • 1% of loans over $2,000,000
  • Agent fees will be paid by the lender out of the fees the lender receives from SBA
  • Agents may not collect fees from the borrower or be paid out of the PPP loan proceeds
    • 1% of loans below $350,000
    • 0.5% of loans of $350,000 to $2,000,000
    • 0.25% of loans over $2,000,000
  • Amounts forgiven are treated as loan guaranteed for SBA
  • SBA pays forgiveness not later than 90 days
  • SBA shall purchase from lender Expected Forgiveness Amount not later than 15 days

 

  • Expected Forgiveness Amount is amount expected to expend in 8 weeks after origination for
    • Payroll costs
    • Payment of mortgage interest (but not principal)
    • Payment of rent
    • Utility payments
    • must be at 75% used for payroll
  • A lender may request that the SBA purchase the expected forgiveness amount of a PPP loan or pool of PPP loans at the end of week seven of the covered period
  • To submit a PPP loan or pool of PPP loans for advance purchase, a lender shall submit a report requesting advance purchase with the expected forgiveness amount to the SBA
  • The Administrator will purchase the expected forgiveness amount of the PPP loan(s) within 15 days of the date on which the Administrator receives a complete report that demonstrates that the expected forgiveness amount is indeed reasonable.
  • The lender does not need to conduct any verification if the borrower submits documentation supporting its request for loan forgiveness and attests that it has accurately verified the payments for eligible costs.
  • The Administrator will hold harmless any lender that relies on such borrower documents and attestation from a borrower.

 

  • Applicant must submit SBA Form 2483 (Paycheck Protection Program Application Form) and payroll documentation.

  • Lender must submit SBA Form 2484 electronically in accordance with program requirements and maintain the forms and supporting documentation in its files 

  • (4/8 update) Lenders may use their own promissory note or an SBA form of promissory note. 
  • (4/8 update)The lender must make the first disbursement of the loan no later than ten calendar days from the date of loan approval. 

 

Interaction with EIDL Loan

PPP proceeds can be used for refinancing an SBA EIDL loan made between January 31, 2020 and April 3, 2020. If you received an SBA EIDL loan from January 31, 2020 through April 3, 2020, you can apply for a PPP loan. If your EIDL loan was not used for payroll costs, it does not affect your eligibility for a PPP loan. If your EIDL loan was used for payroll costs, your PPP loan must be used to refinance your EIDL loan. Proceeds from any advance up to $10,000 on the EIDL loan will be deducted from the loan forgiveness amount on the PPP loan. 

 

Fee Waiver

  • SBA collects no fee under 23(a) and 18(a) (no upfront guarantee fee)
  • no lender’s annual service fee (“on-going guaranty fee”)
  • no subsidy recoupment fee
  • no fee payable to SBA for any guarantee sold into the secondary market.

 

All can rely upon guidance  available at time of application

  • There is no need to change an already submitted application based on the new guidance.  Borrowers and lenders may rely on the laws, rules, and guidance available at the time of the relevant application. However, borrowers whose previously submitted loan applications have not yet been processed may revise their applications based on clarifications reflected in these FAQs.

 

 

We ask you to understand that this information is preliminary and is subject to change. As the SBA continues to publish program guidance about the Paycheck Protection Program, we are committed to keeping our valued clients well-informed. This is not intended to be legal advice. No attorney client relationship is created by this information.  Our attorneys can give legal advice only in the context of an attorney- client relationship after a conflict check, the execution of a representation agreement and a discussion of the specific information and unique issues facing your business.

If you have a questions about the CARES ACT or issues affecting your business in this crisis, contact Allen Stahl + Kilbourne

By James Kilbourne and Derek Allen

 

Updated: April 9, 2020

 

 

 

Any statements contained herein do not constitute a formal legal opinion and should not be relied upon as such. These articles are intended for general informational purposes only.  Nothing expressed shall be grounds for the creation of an attorney-client relationship.  Our attorneys can give legal advice only in the context of an attorney-client relationship after a conflict check, the execution of a representation agreement and a discussion of the specific information and unique issues of your particular circumstances.

The situation surrounding COVID-19/coronavirus is changing constantly; as a result, any discussions that might take place may not necessarily reflect the latest information regarding recently-enacted, or pending or proposed legislation or guidance that could override, alter or otherwise affect existing legal analysis.