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4-3-2020 UPDATE – SBA Documentation Checklist and Paycheck Protection Program Treasury Guidance Update

***** 4-3-2020 Update *****


You must submit specific documentation  with your PPP loan application in order to be reviewed and potentially accepted.  Find the list here: Documentation List.

Key Points from the U.S. Treasury Guidance

Background:  On April 1, 2020, the U.S. Department of the Treasury released guidance on the Paycheck Protection Program (PPP) which has modified certain provisions under the CARES Act.

Maturity Date & Interest

***** These loans now have a maximum maturity of 2 years and a fixed interest rate that will not exceed 1.0%. *****

Under the CARES Act, loans had a maturity of 10 years and an interest rate of 4%.

Maximum Loan Amount

  • The maximum loan amount is the lesser of:
  1. 2.5 times the average monthly “payroll costs” for the one-year period prior to the loan origination date; or
  2. $10 million.

Non-Payroll Cost Forgiveness

  • Due to the anticipated high subscription, no more than 25% of the forgiven amount may be for non-payroll costs. The CARES Act did not provide a cap on non-payroll forgiveness.

Deferred Payments

  • All payments may be deferred for six (6) months. Under the CARES Act, payments could be deferred for up to one (1) year.

First Come, First Served

  • Although the program is open until June 30, 2020, borrowers are encouraged to apply as quickly as possible because of the funding cap. Borrowers will be granted loans in the order applications are received. The CARES Act did not specify how the loan applications would be prioritized.

Employee Lay Offs, Compensation Reduction and Impact on
Loan Forgiveness

  • The intent of the program is to ensure employees remain employed. Thus, the amount of the PPP loan eligible for forgiveness will be reduced by the number of employees terminated during an eight-week period following the date of the loan’s origination. If the number of employees is reduced relative to the borrower’s prior employment levels (as determined from the data that was provided to the bank to obtain the loan), the amount eligible for forgiveness will be reduced. A reduction in forgiveness also applies if employees’ salaries are reduced by more than 25% (they are treated for loan forgiveness purposes as if they are terminated). Note that if additional employees are hired prior to June 30, 2020, then layoffs based on the 8- week period can be mitigated and the loan forgiveness will apply.
  • Trying to “game” the system will not likely work.  Decisions should be made on hiring, firing and salary reductions based on the requirements of your business, not an attempt to maximize the benefit from loan forgiveness – largely because you may not be successful in obtaining a loan and the timing of when the loan actually funds is still unknown.