SBA’s Paycheck Protection Program: Coronavirus Relief Act Offers Loans to Management Companies, Others

• Loan amounts up to 250% of the average covered monthly payroll and selected overhead expenses (payroll, benefits, rent, mortgage and interest) not to exceed $10 million.
• No fees.
• No prepayment penalties.
• No business collateral or personal guarantees are required.
• Use the funds for anything your business needs.
• Loan forgiveness available for eligible payroll and benefits, rent, mortgage and interest for the 8-week period after origination. Reduced forgiveness amount if payroll costs are lessened through layoffs or wage cuts.
• Payments may be deferred up to 12 months.
• Repayment term of 10 years.

While there’s no limit on what the loan can be used for, loan forgiveness is available for certain expenses paid with loan proceeds within the first 8 weeks after loan origination:

• Payroll (but not exceeding salaries is excess of $100,000 a year).
• Health care for employees.
• Mortgage payments on preexisting loans.
• Rent on preexisting leases.
• Utilities.
• Interest on debt for preexisting loans.

Any SBA-approved lender. As of this writing, Chase Bank has announced that while it will have the program up and running on April 3, it will not offer PPP loans except to existing business customers. US Bank, the largest SBA lender in the Seattle area, also expects to be up and running on April 3, and will accept all applications, whether or not the borrower is a current US Bank client.

• Lender applications will be accepted through June 30, 2020 or until funds run out
  • The program is first come, first served, so apply early!
• The Treasury Department has an application form available:
  https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Application-3-30-2020-v3.pdf
  • However, it is unknown whether lenders will be using this form in conjunction with their own applications, or whether the banks’ applications will replace the Treasury Department’s form. It may be worthwhile to check your preferred lender’s website first.
• At a minimum, you’ll want to have the following information:
  • The date you started your business.
  • Your company’s mailing address.
  • Detailed information in order to calculate the past 12 months’ payroll for your employees, mortgage, rent and utilities.
  • Your company’s annual revenue.
  • 2019 financials, including P&L and balance sheet.
  • Your most recent IRS Form 941 – Employer’s Quarterly Federal Income Tax Return.
• Lenders applications will be available online.
  • US Bank’s inquiry form can be found here:
    https://apply.usbank.com/applications/business/InquiryForm
• While the PPP application process will be almost entirely self-reported (less verification than is typical for SBA loans is expected), do note that there are criminal penalties of up to $1 million for submitting fraudulent information to a federally-insured lender.

SBA will issue additional guidance on loan forgiveness by April 26, 2020.

For now, we know that the loan amounts will be forgiven so long as:

1. 75% or more of the loan amounts are used to cover payroll, mortgage interest, rent and utilities during the first 8 weeks after the loan is made.
2. Employee payroll and compensation is maintained.

Borrowers who reduce the number of full-time employees or salary levels between February 15, 2020 and April 26, 2020, face a reduction in loan forgiveness unless they restore the number of full time employees and salary levels by June 30, 2020.

Loans covering payroll above $100,000 per person will not be forgiven. It is unclear if this is inclusive or exclusive of benefits.