Updated Paycheck Protection Program Guidance for Small Businesses

by G. Wythe Michael

The US Treasury Department has released additional guidance on the Paycheck Protection Program along with the application that will be used by borrowers. The additional guidance is summarized below. For additional detail and summary of the Paycheck Protection Program please see our previous post. Please contact us if you have questions regarding this program or any of the other provisions contained in the Act.

The fact sheet from the Treasury Department contains the following details:

  • “Due to likely high interest, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.” This is a change from the law which did not contain a cap on rent or utility amounts used to calculate the forgiveness amount.
  • Applications will begin to be accepted on April 3 for small businesses and sole proprietorships.
  • Applications will begin to be accepted on April 10 for independent contractors and self-employed individuals.
  • 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.
  • The interest rate on the loan will be a 0.50% fixed rate. This is a change from the law which indicated that the interest rate could be up to 4%.
  • The term of the loan will be 2 years. This is a change from the law which indicated that the loan could be up to 10 years.
  • The application is available here.

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

    We believe that this loan program remains extremely attractive and that there will be unprecedented demand for the program. Therefore, 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 8 week payroll).

    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.