SBA Guidance on Paycheck Protection Program (PPP)

The SBA recently released some early guidance regarding the paycheck protection program (PPP), which is open through June 30, 2020. 

This guidance confirms that:

  1. Loan terms will be the same for all borrowers
  2. Loans will carry a 0.50% fixed rate
  3. No collateral is required
  4. No personal guarantee is required
  5. Loans have a two-year term and no pre-payment penalty
  6. Loan amounts will be forgiven as long as they are used to cover payroll costs and mortgage interest, rent, and utility payments in the eight-week period after the loan is made, so long as employee and compensation levels are maintained
  7. The loan amounts will be calculated by lenders using the tax documents submitted
  8. Loan payments will be deferred for six months
  9. Lenders may not collect any fees from applicants.  

Small businesses, including nonprofits and sole proprietorships, can apply for and receive loans beginning on April 3.  Independent contractors and self-employed individuals can do so beginning on April 10.  Borrowers can apply through any existing SBA lender or through any participating federally insured depository institution or credit union.  Other regulated lenders may also later enroll in the program. 

Applicants will need to complete a PPP loan application, available on the SBA website, and submit it along with the required documentation (payroll and tax filings) to their participating lender.  That application must certify that: 

  1. Current economic uncertainty makes the loan necessary to support ongoing operations
  2. Funds will be used to retain workers and maintain payroll, or to make other eligible payments;
  3. No other loan will be received under the PPP
  4. Certain documentation will be provided to the lender.  ​

Loan recipients who later wish to request forgiveness can do so with the lender servicing the loan.  That request must include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on other eligible obligations.  A certification as to the truthfulness of the request is required.  The lender must make a decision on the forgiveness within 60 days.

For more information, contact our CARES Act Task Force or your MSPC partner.