Last night, the United States Small Business Administration (SBA) issued the interim final rule and the borrower application form for the Paycheck Protection Program (PPP) that starts today, Friday, April 3 . The current regulations build on, and in some cases modify, prior versions of the Program. Key updates include:
  • Applicants may not include independent contractors in their calculation of payroll costs because independent contractors can apply for loans themselves.
  • Loan forgiveness requires that at least 75% of the loan be used to cover payroll costs and no more than 25% is used for other eligible expenses.
  • The SBA has changed the interest rate on the portion of the loan that is not forgiven to 1% from the prior 0.5%.

MNN will keep nonprofits updated as additional guidance is released by SBA.

Nonprofits interested in applying for the PPP loan should contact their bank, accountant, or lawyer immediately. A list of qualified SBA lenders is  here . With additional questions on the new supports created by federal and state policy, contact MNN Director of Government Affairs  Danielle Fleury  here .
Share Your Experiences Applying for Payroll Protection Program Loans
If you have applied for a PPP loan,  please share your experience in this short survey . Our counterparts at the National Council of Nonprofits (NCN) are collecting stories and data to ensure the program is running as it should. If you experienced any problems, please report what happened so they can identify any patterns of problems and propose fixes–informal and formal–at the appropriate spots. Information collected will help inform if further advocacy is needed to ensure nonprofits have the resources they need to continue serving their communities. You can  learn more about these loans and other options   from NCN.
Interim Final Guidance on Paycheck Protection Program Loans
Payroll Costs Defined
The current regulations state that applicants should not include independent contractors in their payroll cost calculations; the regulations state that "independent contractors have the ability to apply for a PPP loan on their own."

Other exclusions   from payroll cost calculations:   federal employment taxes imposed or withheld between February 15, 2020 and June 30, 2020, including the employee's and employer's share of FICA and Railroad Retirement Act taxes, and income taxes required to be withheld from employees; compensation for employees based outside the U.S; compensation in excess of $100,000 (prorated); and qualified paid leave under the  Families First Act .

Consult your lender; the best and latest guidance is flowing from SBA to lenders directly.

Current SBA guidance on payroll costs is as follows: "Payroll costs consist of compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement; payment of state and local taxes assessed on compensation of employees; and for an independent contractor or sole proprietor, wage, commissions, income, or net earnings from self-employment or similar compensation."

Calculating Payroll Costs
The rule lays out a five-step process for calculating payroll costs for purposes of PPP loans:
  1. Aggregate payroll costs (see above) for last 12-months;
  2. Subtract pay from each employee in excess of $100,000;
  3. Divide step 2 total by 12 months to get the monthly average;
  4. Multiply step 3 total by 2.5; and then
  5. Add any outstanding amount from an EIDL loan received between 1/31/2020 and 4/3/2020, “less the amount of any ‘advance’ under an EIDL COVID-19 loan (because it doesn’t have to be repaid).

75%-25% Rule for Forgiveness
SBA will limit how much of a loan can be forgiven based on how the borrower spends the money. Loan forgiveness requires at least 75 percent of the loan amount be spent on payroll and no more than 25 percent on other eligible expenses (rent/mortgage, utilities). This restriction isn’t in the statute but SBA says it is imposing the restriction to promote employment.

Interest Rate 
Contrary to earlier announcements from SBA, the interest rate for PPP loans has now been set at 1 percent, up from the 0.5 percent that was reported earlier.

Lender Scrutiny
The regulations state: “The lender does not need to conduct any verification if the borrower submits documentation supporting its request for loan forgiveness and attests that it has accurately verified the payments for eligible costs. The Administrator will hold harmless any lender that relies on such borrower documents and attestation from a borrower.”

Borrowers must complete the  SBA Form 2483  (Paycheck Protection Program Application Form) and provide payroll documentation.