On April 2, 2020, the U.S. Small Business Administration (SBA) released its Interim Final Rule, which provides further guidance on the Paycheck Protection Program (PPP). Here are a few things you should know:
- No more than 25% of the loan proceeds may be expended on eligible expenses other than payroll costs.
- The lender will calculate the eligible loan amount using the tax documents submitted.
- Loans carry a 1% fixed rate, a two-year term and no prepayment penalty.
- Loan payments will be deferred for six months, but interest will accrue during the six-month period.
- Payments to independent contractors do not count toward the maximum loan amount. Independent contractors must apply on their own.
- Aggregate payroll costs only include employees whose principal place of residence is in the U.S.
- If the applicant received an Economic Injury Disaster Loan (EIDL) between January 31, 2020, and April 3, 2020, the applicant is eligible for a PPP loan, but if the EIDL was used for payroll costs, the PPP loan must be used to refinance the EIDL. If an EIDL received during that time was not used for payroll, it will have no impact on qualifying under PPP.
- Lenders may not collect any fees from the applicants.
- One loan per borrower.
Beginning April 3, 2020, small businesses, including 501(c)(3) nonprofits and sole proprietorships, can apply for and receive loans to cover their payroll and certain other expenses through existing SBA lenders. Starting April 10, 2020, independent contractors and self-employed individuals can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders. The Paycheck Protection Program is open until June 30, 2020, so businesses are encouraged to apply as quickly as possible as there is a funding cap and lenders will need time to process the loans.