UPDATE: CARES Act: Paycheck Protection Loans and Eligibility for Loan Forgiveness 

April, 2020 - Scott Smith

Last Friday, March 27, we published CARES Act: Paycheck Protection Loans and Eligibility for Loan Forgiveness. This alert is intended to provide an update concerning implementation of the Paycheck Protection Loan application process.

The SBA has posted a Paycheck Protection Application Form on its website.

  1. Since the loans will be funded by private SBA lenders, and guaranteed by the SBA, most borrowers are lining up with private SBA lenders now. If your bank is not an approved SBA lender, here is a list of banks you can choose from.
  2. The paycheck protection loan term will be up to two years with an interest rate of 0.5%. Payments may be deferred for six months to one year. After June 30, 2020, Borrowers may petition the lender and the SBA to have the principal forgiven provided that the funds have been used for payroll costs, interest on a mortgage obligation, rent, or for utility payments during the 8 week period following inception of the loan. Due to the likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs. The SBA would purchase the forgiven loan from the lender. Any remaining balance would be repaid over the two year period.
  3. Many prospective borrowers have asked whether they must search their applicable North American Industry Classification System code to determine whether they qualify as a “small business” under SBA guidelines based upon their revenues. By all appearances, such guidelines apply only to SBA 7(a) loans, and will not apply to Paycheck Protection Loans. In order to qualify for a Paycheck Protection Loan, a borrower need only have fewer than 500 employees and certify that current economic uncertainty makes the loan request necessary to support the ongoing operations of the borrower.
  4. Borrowers should carefully review the affiliation rules that may be applicable to them to ensure availability.
  5. For further information, please contact us and review this useful information sheet recently published by the SBA.


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