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US Treasury Department Issues Application Form and Other Guidance in Connection with the Paycheck Protection Program
By David W. Morse, Esq.
As of March 31, 2020, the US Treasury Department has issued the application form and other guidance in connection with the Paycheck Protection Program which can be found on its website: https://home.treasury.gov/cares
The materials on the website include:
● Paycheck Protection Program Overview
● Paycheck Protection Program (PPP) Information Sheet: Lenders
● Paycheck Protection Program (PPP) Information Sheet: Borrowers
● Paycheck Protection Loan Program application
● Paycheck Protection Program – Interim Final Rule
There are links in the Treasury Department website for each of the items listed above. While the Interim Final Rule from the SBA included in the materials on the Treasury Department website provides more guidance for how banks that are SBA lenders are to underwrite the loans under the program, including with reference to “know your customer” and anti-money laundering regulations, each SBA lender will need to establish their process for accepting applications, approving and making of loans under the program. As noted below, there are also some discrepancies between the materials published by the Treasury Department and the Interim Final Rule that has been issued by the SBA.
Here are a few key points from the materials issued by the Treasury Department that supplement the points noted in the article on the CARES Act that appeared in TSL Express on March 31:
- All loan terms are to be the same for all borrowers.
- Starting April 3, 2020, small businesses and sole proprietorships will be able to apply for and receive loans through existing SBA lenders.
- Staring April 10, 2020, independent contractors and self-employed individuals can apply for and receive loans.
- The application notes that the borrower will owe money when the loan is due if it is used for any purpose other than payroll costs, mortgage interest, rent and utilities payments over the 8 weeks after getting the loan.
- It is anticipated that not more than 25% of the forgiven amount may be used for non-payroll costs (i.e. used for interest, rent and utilities). The Interim Final Rule included as a link on the Treasury website referred to above has more detail on the limitation on amounts that may be forgiven based on the use of loan proceeds for non-payroll costs, but also notes that the SBA will issue additional guidance on loan forgiveness.
- The interest rate is to be 0.50% fixed rate per year. The Interim Final Rule, that may be obtained from the Treasury website, says that the interest rate will be 1.00%. The SBA and the Treasury will need to reconcile this discrepancy.
- All payments of principal and interest are deferred for 6 months but interest will accrue during this period.
- The loan will be due in 2 years.
- The materials from Treasury and the statute do not include any limitation on the type of businesses that may be eligible for loans under the Paycheck Protection Program. However, the Interim Final Rule includes a list of other criteria, and including that businesses identified in 13 Section CFR 120.110 are not eligible. One of the types of businesses listed in Section 13 CFA Section 120.110 is: Financial businesses primarily engaged in the business of lending, such as banks, finance companies, and factors.