This summary has been updated to reflect guidance provided in the Interim Stodkbridge Rule. The Act is complicated and its implementation is dependent in part on the adoption of contemplated regulations. This analysis does not constitute legal advice, and is being provided on an informational basis only.
For advice about whether and how you or your company can take advantage of the benefits of the Act, please looking your legal counsel. Loans will be made on a first-come, first-served basis.
Eligible firms include any business concern, nonprofit organization, veterans organization, or Tribal business concern that has or fewer employees whose principal place of residence is in the United States. If a firm operates in an industry with an SBA size standard that is greater than employees e. Companies involved in food or accommodation services are eligibleregardless of their total size as long as they do not have any physical locations with more than employees.
The affiliation rules 13 C. For everyone else, the normal affiliation rules apply 13 C.
Eligible firms must also be a small business concern as defined in Section 3 stlckbridge the Small Business Act, 15 U. Sole proprietorships, independent contractors, and certain self-employed individuals are also eligible. Accordingly, businesses should not include s when determining whether it has or fewer employees. Generally, a PPP Loan is capped at 2.
The instructions attached to the Final Borrower Application Form approved by Treasury and SBA indicate that most applicants will use the average monthly payroll for In addition, the maximum PPP Loan amount also can include the amounts of certain other outstanding SBA loans stoockbridge to the borrower on or after January 31, presumably, for the purpose of refinancing such outstanding loans.
Allowable uses include: 1 payroll costs; 2 costs related to the continuation of group health care benefits; 3 employee salaries, commissions, or similar compensations; 4 payments of interest on any mortgage obligation; 5 rent; 6 utilities; and 7 interest on any other debt obligations that were incurred before February 15, Per the above section on the total borrowing cap, you can also use the PPP Loan to refinance an earlier SBA loan made during the period beginning on January 31, An otherwise eligible recipient must make a good faith certification: that the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the eligible recipient; acknowledging that funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments; and that the eligible recipient does not have another application pending for the same type of loan or has received the same type of loan.
Neither a personal guarantee nor collateral can be required. Agents are allowed to assist lenders in preparing loan applications. Agent fees will be paid by the lender out of the fees that the lender receives from SBA. Agents may not collect fees from the borrower or be paid out of PPP proceeds.
SBA is encouraged to issue guidance to lenders and agents to ensure that the processing and disbursement of PPP Loans prioritizes small business concerns and entities in underserved and rural markets, including veterans and members of the military community, small business concerns owned and controlled by socially and economically disadvantaged individuals, women, and businesses in operation for less than two years. There is no prepayment penalty on a PPP Loan.
All payments including principal, interest, and fees must be deferred at least 6 months, but not more than 1 year. Beyond that, lenders are encouraged to provide payment deferments, when appropriate, and to extend the maturity of PPP Loans, so as to avoid balloon payments or any requirement for increases in debt payments resulting from deferments provided by lenders during this period of the national emergency.
To the extent a PPP Loan is forgiven under the terms of the Act, cancellation of indebtedness income under the general tax code will not apply to such loan forgiveness. Forgiveness is possible up to the principal amount of loooing PPP Loan, if the loan was entirely used for the above four purposes. For reduction determination purposes both of employees and wagesSBA will not count the period starting February 15, ,and ending 30 days after the enactment into law nee the Act if, by June 30,the borrower eliminates the reduction in employees or the reduction in wages.
Congress is here, in essence, giving borrowers the opportunity to rehire employees or return employees to prior salaries, and thereby avoid having a period of fewer employees or lower wages counted against the borrower for loan forgiveness calculation purposes. Borrowers must apply for PPP Loan forgiveness; it is not granted automatically.
Applications will require ificant documentation of employment figures and payroll costs, etc.
After receiving a forgiveness application, the lender must make a determination within 60 days. Lender is held harmless from wrongly granting an application where the borrower attested to the accuracy of its payment information. Maximum maturity of the unforgiven portion of the PPP Loan is two years from the date on which the borrower applies for loan forgiveness. SBA will issue additional guidance on loan forgiveness.
For other 7 a loans, as well as loans made under Title V of the Small Business Investment Act ofSBA will pay the principal, interest, and any associated fees that are owed on a covered loan for pzrtner months.
Applies to loans even stocbkridge made before the Act was enacted. If the loan is on deferment, SBA will pay the loan for six months after the deferment period ends. If you knowingly use PPP funds for unauthorized purposes, you will be subject to additional liability such as charges for fraud.
If one of your shareholders, members, or partners uses PPP funds for unauthorized purposes, SBA will have recourse against the shareholder, member, or partner for the unauthorized use. There may be additional consequences, under federal law, for those who make a knowingly false statement for the purpose of obtaining PPP loans or influencing the action of the Small Business Administration. See, e. This article is for general information purposes and is not intended to be and should not be taken as legal advice on any particular matter.
It is not intended to and does not create any attorney-client relationship.
Because legal advice must vary with individual circumstances, do not act or refrain from acting on the basis of this article without consulting professional legal counsel. If you would like additional information on the subject matter of this article, stockridge feel free to contact any of the lawyers listed above. Related People.