SBA and Treasury Department Issue Further Guidance on the Paycheck Protection Program Loans Which May Be Forgiven

Written By: David T. Azrin

woman calculating expenses

The Small Business Administration and the Treasury Department yesterday published further guidance and forms on the new Paycheck Protection Program (“PPP”) described in our prior post. For the SBA guidance, click here. For the Treasury Department guidance, click here.

The PPP program will provide loans to businesses with 500 or fewer employees, as well as to individuals and sole proprietors, for up to two and half times last year’s average monthly payroll costs, excluding costs over $100,000 on an annualized basis for each employee. These loans can be forgiven in full or in part depending on whether you reduce staff or salaries, and with respect to reductions prior to April 26, you do not rehire or restore the salary levels by June 30. To be forgiven, the money must be used eight weeks after the loan is made for payroll costs including benefits, rent, utilities, and mortgage interest. Highlights of the new guidance: 

When should I apply? 

According to the Treasury guidance, lenders can start processing applications as early as Friday, April 3, 2020, for small businesses and sole proprietorships, and Friday, April 10, 2020, for independent contractors and self-employed individuals. The Treasury guidance states:

“Although the program is open until June 30, 2020, we encourage you to apply as quickly as you can because there is a funding cap and lenders need time to process your loan.”

Where can I apply?

According to the Treasury guidance, you should consult with your local lender as to whether it is participating. Visit for a list of SBA lenders. Click here for a list of the 100 most active SBA-approved 7(a) lenders as of December 31, 2019.

How do I calculate the amount of the loan?

The SBA Instructions clarify that,

“For purposes of calculating ‘Average Monthly Payroll’, most Applicants will use the average monthly payroll for 2019, excluding costs over $100,000 on an annualized basis for each employee.” Seasonal businesses and new businesses may use different time periods, specified in the instructions.

What can I use the money for?

To be forgiven, you must use the money for payroll costs including salaries, wages, benefits, rent, utilities, and mortgage interest, during the eight weeks after the loan. 

The SBA website adds a new requirement that “at least 75% of the forgiven amount must have been used for payroll.”

The new guidance adds the following new certification requirements not contained in the statute:

  • A certification that “it is anticipated that not more than twenty-five percent (25%) of the forgiven amount may be for non-payroll costs,” and
  • A representation that, “to the extent feasible, I will purchase only American-made equipment and products.” 

How much of the loans will be forgiven?

The SBA website states that the loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities, and adds a requirement that “at least 75% of the forgiven amount must have been used for payroll.” 

According to the Treasury guidance,

“You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utility payments over the 8 weeks after getting the loan. Due to likely high subscriptions, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs. 

You will also owe money if you do not maintain your staff and payroll:

  • Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
  • Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
  • Re-Hiring: You have until June 30, 2020, to restore your full-time employment and salary levels for any changes made between February 15, 2020, and April 26, 2020.”

What is my interest rate on the amount that is not forgiven? 

The interest rate is .50% per annum fixed rate, payable in 2 years. All payments are deferred for 6 months; however, interest will continue to accrue over this period.

What documentation will I need to provide?

You must submit “tax documents” to support the calculation of your payroll costs in 2019 to determine the amount of the loan.

The Treasury guidance directs that lenders will need to verify the following:

  • “that a borrower was in operation on February 15, 2020,” 
  • “that a borrower had employees for whom the borrower paid salaries and payroll taxes,“ and
  • “the dollar amount of average monthly payroll costs.”

How will agents be compensated who assist you in preparing the application?

According to the Treasury guidance, “Agent fees will be paid out of lender fees. The lender will pay the agent. Agents may not collect any fees from the applicant.

  • Loans $350,000 and under: 1.00%.
  • Loans greater than $350,000 to $2 million: 0.50%
  • Loans greater than $2 million: 0.25%.”
The information below is based upon current information known to our firm. As the COVID-19 regulations are in a state of flux, we recommend that you contact our firm to learn of any changes applicable to the PPP loan program.
about the authors