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Guidance issued from the Treasury Department
The Paycheck Protection Program, starting this week, will provide up to $350 billion in fully forgivable loans to help small businesses maintain payrolls during the coronavirus pandemic. The loans are fully guaranteed by the Small Business Administration. But, the SBA will waive all SBA guaranty fees. PPP loans are made for two years at a 0.5% fixed rate with payments deferred for six months.
Who can make a Paycheck Protection Program Loan?
All banks, as well as a broad range of nonbanks, are eligible to make Paycheck Protection Program loans. Existing SBA-certified lenders will be given delegated authority. Others are preapproved. Banks that have not yet been certified with the SBA should submit an application to delegatedauthority@sba.gov. The SBA verifies banks that apply are federally regulated. New applicants will be able to process applications as soon as Friday. This is according to a senior administration official.
How do I get underwritten?
To underwrite PPP loans, lenders will need to verify that the borrower was in operation on Feb. 15, 2020. As well as, it had employees for whom it paid salaries and payroll taxes. The lender will also have to verify the dollar amount of average payroll costs. The SBA will not review loan applications. Lenders will receive an SBA loan number to verify the applicant has not already received a PPP loan.
The SBA will pay the lender a processing fee calculated on the loan balance. This fee ranges from 1% for loans greater than $2 million to 5% for loans $350,000 or less. PPP loans sold in the secondary market will not collect fees for guarantees sold. The guidance includes fee caps for agents assisting with loan applications.
When Can I apply?
Small businesses and sole proprietorships—generally, those with 500 or fewer employees—may apply for PPP loans starting on Friday, April 3; independent contractors and self-employed workers can apply starting April 10. PPP loans will be fully forgiven when used for payroll costs, interest on mortgages, rent and utilities, with at least three quarters of the forgiven amount being used for payroll; forgiveness is based on employers maintaining headcount or quickly rehiring and maintaining salary levels.
