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