The U.S. Department of Treasury provided additional guidance on March 31, 2020 (the “Guidance”) on the Paycheck Protection Program (7(a) loans).

When You Can Apply For The Program

• April 3 for small businesses and sole proprietorships.

• April 10 for independent contractors and self-employed individual.

• A sample application can be found here.

Employees Making More Than $100,000

The CARES Act was unclear on how to treat employees making over $100,000. The Guidance makes it clear that you can include employees making over $100,000 but they will be capped at $100,000.

How to Use Loan Proceeds

The Guidance updates what you can use loan proceeds on to:

• Payroll costs including benefits;

• Interest on mortgage obligations incurred prior to February 15, 2020;

• Rent, under lease agreements in force prior to February 15, 2020; and

• Utilities, for which service began prior to February 15, 2020.

Forgiveness

The Guidance clarifies that for forgiveness, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.

Loan Terms

• Interest rate: 0.5% fixed rate.

• Maturity: 2 years.

Who Needs to Sign the Application?

• For a sole proprietorship, the sole proprietor;

• For a partnership, all general partners, and all limited partners owning 20% or more of the equity of the firm;

• For a corporation, all owners of 20% or more of the corporation;

• For limited liability companies, all members owning 20% or more of the company; and

• Any Trustor (if the Applicant is owned by a trust).

The borrower fact sheet put out by the Treasury can be found here.

The lender fact sheet put out by the Treasury can be found here.