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SBA Releases Guidance on Paycheck Protection Program
The Small Business Administration (SBA) has released guidelines on the Paycheck Protection Program (PPP) - a key portion of the recently enacted CARES Act. The PPP has up to $349 billion available for low-interest loans to help small businesses meet payroll and overhead costs through the next few months.
While applications for the PPP are scheduled to open up today, Friday, April 3, there have been a number of changes in the details of the program leading up to its launch. As a result, many banks still appear to have some unanswered questions and are playing "catch up" due to the early release of the guidelines last night. This has caused some banks to communicate that they are not yet accepting applications until they have further direction from the SBA. Having said that here is what we know at this point:
  • The Small Business Administration (SBA) which is administering the PPP program, has issued guidance that is different than the language in the CARES Act.
  • The measurement period for determining average payroll costs is calendar year 2019 (not the trailing 12-month period). However, we have been told that some lenders are accepting the trailing twelve months.
  • The payroll multiplier for the loan amount is 2.5 (as opposed to Tuesday's communication by the SBA that it would be 2.25%).
  • The interest rate that will be charged on the loan will be fixed at 1% (it was previously "up to" 4%).
  • Payments to contractors are no longer allowed in the calculation of payroll costs.
  • The term of the loan will be two years, not 10 as outlined in the CARES Act.
  • We anticipate a number of lenders requiring the following information along with the application:
    • Most recently filed corporate income tax returns
    • All payroll tax returns (941's and 940's) supporting the 2019 payroll information included in the loan calculation
    • Support for all employee benefits included in the calculation of payroll costs for the loan
    • Copies of lease agreements demonstrating they were in place prior to 2/15/2020
    • Copies of mortgage agreements demonstrating they were in place prior to 2/15/2020
    • Copies of all utility bills
  • With regard to the 8-week period of costs that could be forgiven under the loan, it appears the following will need to be provided to qualify for forgiveness:
    • Copies of payroll reports for the 8-week period
    • Copies of all support for benefits paid during the 8-week period
    • Copies of cancelled checks or bank statements supporting payment on lease and mortgage interest payments
    • Copies of cancelled checks as well as copies of utility invoices to support utilities paid during the 8-week period
Please be aware that all calculations of loan and forgiveness amounts are estimates and final numbers for the loan and related forgiveness will ultimately be determined by the bank based on the supporting information received.
It appears likely that lenders may be reluctant to loan an amount that does not fall into the category of debt that will be forgiven (payroll, utilities, rent, mortgage). Therefore, the PPP loan may be for an amount lower than many companies qualify for.
Gray, Gray & Gray has developed a proprietary PPP loan calculator to assist our clients with estimating the potential amount of the loan for which their business may be eligible. Clients are reminded to please contact your engagement partner to access the calculator and your bank to tailor the calculator to their requirements.
If you have questions about the Paycheck Protection Program or other aspects of the CARES Act, you can view a recording of Gray, Gray & Gray's recent webinar on "Unwrapping the CARES Act Federal Relief Package" here .  Or call Gray, Gray & Gray at (781) 407-0300.

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