Federal agencies and regulators continue to provide clarifications and guidance to help ensure the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) is working as intended.
On April 2, 2020, the U.S. Small Business Administration (SBA) released an interim final rule on its Paycheck Protection Program (PPP). Highlights of the additional details include:
- The interim rule narrows some CARES Act provisions; notably, the maximum loan term is limited to two years, only one PPP loan is available per eligible borrower, 75 percent of the PPP loan must be used for payroll costs (as defined) and loan forgiveness on the nonpayroll portion of the loan is limited to 25 percent of the computed loan forgiveness amount.
- The payment deferral of principal is limited to six months.
- The loan rate will be 1 percent.
- A bank’s due diligence will consist of borrower certifications, submissions and representations, rather than an independent check by the bank. The SBA will hold harmless any lender that relies on borrower documents and attestations.
- Clarification of documentation requirements for payroll costs and loan forgiveness.
- PPP loans can be sold into the secondary market, which will help to create liquidity. In addition, a lender may request that the SBA purchase the expected forgiveness amount of a PPP loan or pool of PPP loans at the end of week seven of the covered period.
Even though these are proposed rules, the SBA has indicated that they are effective immediately upon publication in the Federal Register. The SBA will assess the need for additional rules or guidance as the COVID-19 situation evolves.
Click here for additional information, including how to apply: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program-ppp