Important Update on SBA 7(a) Loan Program Under CARES Act

On March 31, 2020, the U.S. Department of Treasury (“Treasury”) published additional information on the application process for the Paycheck Protection Program (“PPP”) which is summarized below.  More detailed information on the PPP can be found here: https://www.schneiderdowns.com/our-thoughts-on/paycheck-protection-program

Timing Information: When Can You Apply For The Program?

  • April 3 – Small Businesses and Sole Proprietorships;
  • April 10 – Independent Contractors and Self-employed Individuals.

View a copy of the application here: https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Application-3-30-2020-v3.pdf.

Loan Uses: How Can the Loan Proceeds be Used?

  • Payroll costs, including benefits;
  • Interest on mortgage obligations, incurred before February 15, 2020;
  • Rent, under lease agreements in force before February 15, 2020; and
  • Utilities, for which service began before February 15, 2020.

The CARES Act was unclear on employees making over $100,000.  The Treasury has clarified that any employee making over $100,000 can be included, but their salaries, wages, commissions, or tips will be capped at $100,000 on an annualized basis.

Forgiveness: What Loan Amounts Can be Forgiven?

Specific details on the loan forgiveness can be found here: https://www.schneiderdowns.com/our-thoughts-on/paycheck-protection-program

The loan amounts will be forgiven as long as:

  • The proceeds are used to cover payroll costs and most mortgage interest, rent, and utility costs over the eight week period after the loan is made; and
  • Employee and compensation levels are maintained. 

The Treasury has added that, due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.

Terms: What are the Key Terms of the Loan?

The interest rate will be a 0.50% fixed rate with a two-year term (with no prepayment penalties or fees).

Required Certifications: What Must the Applicant Certify?

The applicant must certify a number of things including that the loan is necessary due to the economic uncertainty and funds will be used for the purposes listed above.  A full list of the certifications are included on the application.

Signatories:  Who Must Sign the Application?

  • Sole Proprietorship – Sole Proprietor;
  • Partnership – All general partners and any limited partner owning 20% or more of the equity of the firm;
  • Corporation – All owners of 20% or more of the corporation;
  • LLC’s – All members owning 20% or more of the company; and
  • Any Trustor if the applicant is owned by a trust.

The Borrower and Lender fact sheets issued by the Treasury can be found here: https://home.treasury.gov/system/files/136/PPP%20Borrower%20Information%20Fact%20Sheet.pdf and here: https://home.treasury.gov/system/files/136/PPP%20Lender%20Information%20Fact%20Sheet.pdf

For additional updates and analysis, visit Schneider Downs’ Coronavirus blogRegister here to receive Our Thoughts On articles as they are updated.

If you need more information, please reach out to any of your contacts at Schneider Downs or contact us at contactsd@schneiderdowns.com.

Please visit our Coronavirus Resource Center for related content.

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at contactSD@schneiderdowns.com.

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2020 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

our thoughts on

Paycheck Protection Program Borrower and Lender Responsibilities
Paycheck Protection Program Borrower and Lender Responsibilities
Paycheck Protection Program Borrower and Lender Responsibilities

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