Second Update: Paycheck Protection Program Small Business Guidance

The US Small Business Administration Treasury Department released an “Interim Final Rule” on Thursday April 2, 2020 with additional guidance on the Paycheck Protection Program. Summarized below are the changes to prior guidance. For additional detail and summary of the Paycheck Protection Program please see our previous posts on March 27 and April 1. Please contact us if you have questions regarding this program or any of the other provisions contained in the Act.
The new rule from the SBA contains the following details:
  • Applications should be made on SBA Form 2483. Applications will be submitted electronically to lenders participating under the program.
  • In a big change, payments made to independent contractors do not count toward payroll. According to the rule, this is because 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.
  • Another big change was made to the forgiveness calculation. Now, rent and utilities (the non-payroll portion of the forgivable loan amount) are limited to 25% of the total forgiveness amount. Said another way, payroll paid in the 8 week period following loan closing must account for 75% of the amount forgiven.
  • The new rule changes the interest rate on loans made under the program from 0.5% to 1%. This is the second change to interest rates; the CARES Act indicated that the interest rate could be up to 4%.
  • Applications may be made to any existing SBA lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating.

    It appears the other major loan program terms are the same.

    As mentioned previously, we recommend that you work with your current lender if possible as most lenders we have talked to will be prioritizing their current customers. We also recommend that borrowers carefully assess their expected payroll over the 8 week period following the loan and only borrow an amount that is likely to be forgiven (8 week payroll plus rent and utility payments up to an additional 25% of the total amount forgiven).

    This summary contains a general, condensed summary of the most recently available version of the CARES Act for information purposes. It is not meant to be and should not be construed as legal advice. Readers with particular needs on specific issues should retain the services of competent counsel.