Following the signing of the CARES Act, the Small Business Administration (SBA) and Treasury Department announced today that they have initiated a robust mobilization effort of banks and other lending institutions to provide small businesses with the capital they need.
Treasury Secretary Steve Mnunchin stated that he expects the Treasury and SBA to have the $349 billion Paycheck Protection Program, established by the CARES Act to help small businesses keep their workforce employed, up and running by this Friday. Here are highlights of the terms and conditions of the program:
- Loans are available up to $10 million
- By April 3, businesses and sole proprietorships will be able to apply for a loan with SBA 7(a) lenders, including banks and credit unions
- Independent contractors and self-employed individuals can apply starting April 10
- Loan payments may be deferred for six months and will be eligible for forgiveness if applied to payroll costs and other business expenses (like rent, utilities and mortgage interest) in the 8 weeks following the loan’s origination and employee and compensation levels are maintained
- Your community lender will manage the application, process your loan and disburse funds using their own systems
- All loans will have an interest rate of 1%, a 2-year maturity, 100% guarantee by SBA, no collateral requirements, no personal guarantees, no SBA fees
- Eligibility extends to all businesses with 500 or fewer employees or under the SBA’s size standard for that industry
[UPDATED] On April 6th, the SBA released a new FAQ for the PPP loan program. Of particular interest are the following:
- Question 7 – the $100,000 limit applies to cash compensation only not to non-cash benefits.
- Question 15 – amounts paid to independent contractors are excluded from payroll costs. An independent contractor or sole proprietor will itself be eligible for a loan under the PPP, if it satisfies the applicable requirements.
- Question 16 – payroll costs are gross. However, employer FICA is NOT included. This applies to both the loan and the forgiveness calculation.
- Question 17 – loan applications may be revised to account for this new guidance but it is not required.
- Question 9 – seasonal businesses may be eligible if they were either in operation on February 15, 2020 or for an 8-week period between February 15, 2019 and June 30, 2019.
Below are additional resources related to the program that may be of benefit:
- Borrower Information Fact Sheet
- Lender Information Fact Sheet
- Paycheck Protection Program Application
- Paycheck Protection Program Overview