Paycheck Protection Program Details (Bulleted)
Like everyone else, we’ve been scrambling to get a better understanding from SBA Preferred Lenders regarding the Paycheck Protection Program of the CARES ACT. This is the best summary we have got to date, which comes by way of a banker at People’s United Bank:
Paycheck Protection Program:
- $349 billion through 6/30/2020 for this program
- It is considered a 7a loan
- 100% guaranty
- Unsecured
- No personal guarantees required
- No SBA fee for the borrower
- No on-going fee to the banks until 6/30/2020
- Normal SBA 7a rates:
- For a term over 7 years, maximum rate of 2.75% over prime
- For a term under 7 years, maximum rate of 2.25 over prime
- Maximum loan amount is 2.5 x average monthly payroll costs or $10,000,000 whichever is less. Add 12 months of payroll divided by 12 x 2.5%.
- If it’s a start up take the payroll from 7/1/2019 to 2/2/2020 divide that x 2.5%
- For Seasonal Businesses average monthly payroll costs 2/15 or 3/1 to 6/30/2019 x 2.5%
Use of Proceeds:
- Any 7a permitted use, but only payroll portion will result in loan forgiveness
- Payroll Costs
- Mortgage Interest
- Rent
- Utilities
Loan Terms:
- 10 years for unforgiven portion
- Payment deferment up to 1 year
Loan Forgiveness:
- Forgiveness amount will be reduced based upon the reduction in # of employees or amount of compensation.
- Want to make businesses retain employees or hire back employees that were laid off
- If they do not retain or bring back laid off employees, the payroll portion will not be forgiven
- Forgiveness amount will be paid within 5 days of receiving a report from lender on expected forgiveness amount
- Will get more clarification on this
Documentation:
- 1919 and 1920
- Working on a revised and simplified version of both forms
- 4506-T still deciding on
- Original signatures have been addressed in an earlier Notice. Basically, we can accept scanned copies of Note and closing docs if e-signatures are not available, but we have to get originals within six months
- Documentation is still a moving target
