Business LawPandemic

Paycheck Protection Program Information

This is a living document that I will update from time to time as I receive more information from the government, lenders, and the experiences of borrowers.

In a nutshell, here are the broad strokes of the program:

  • It’s a loan that can be forgiven to the extent of your payroll, rent, utilities, and mortgage interest for the 8 weeks following receipt of the loan.
  • Any balances not forgiven will be paid off at 0.5% over 2 years.
  • The amount of forgiveness will be reduced if you keep fewer employees on staff than before the crisis.

Rates, Terms, Fees

  • 0.5% for 2 years1
  • The SBA guarantee fee is waived.2
  • No collateral3
  • No personal guarantee4

Loan amount

The loan amount is determined by the statute, and it is 2.5 times your average monthly payroll costs for the trailing twelve months prior to the loan application.

Underwriting

As far as we know now, these are the only underwriting requirements:5

  • Borrower must have been in operation on 2/15/2020
  • Borrower must have employees for whom borrower paid salaries and payroll taxes
  • Verification of dollar amount of average monthly payroll costs
  • Other Bank Secrecy Act requirements as needed

Forgiveness

The loan will be forgiven under the following circumstances:

  • The loan proceeds are used to cover payroll costs, mortgage interest, rent and utilities over the 8 weeks after receipt of the loan
  • Employee headcounts and compensation levels are maintained (there is a proration if headcount or salaries fall, but these are the broad strokes)

Link to the Senate guide on the CARES Act

  1. https://home.treasury.gov/system/files/136/PPP–Fact-Sheet.pdf
  2. https://home.treasury.gov/system/files/136/PPP%20Lender%20Information%20Fact%20Sheet.pdf
  3. https://home.treasury.gov/system/files/136/PPP–Fact-Sheet.pdf
  4. https://home.treasury.gov/system/files/136/PPP–Fact-Sheet.pdf
  5. https://home.treasury.gov/system/files/136/PPP%20Lender%20Information%20Fact%20Sheet.pdf

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