- Only 60% of Loan must be Used for Payroll Costs. At least 60% of the loan must be used for Payroll Costs (as defined in the Act and- discussed below) and up to 40% may be used for permitted non-Payroll Costs (i.e., rent, interest on mortgages and utilities). The SBA previously required at least 75% of the loan must be used for Payroll Costs. This amendment is applicable to loans already received.
- Time Period to use Loans Increased from 8 Weeks to 24 Weeks. A borrower will be eligible for loan forgiveness for Payroll Costs (capped at $100,000 per employee), rent, interest on mortgages and utilities incurred during the “covered period.” The “covered period” has been extended from 8-weeks post-loan origination to the date commencing on the loan origination date and ending on the earlier of: (a) the date that is 24-weeks after the date of loan origination and (b) December 31, 2020. This amendment is applicable to loans already received.
- Amendments to Reductions in Forgiveness Amounts due to Workforce and Salary Reductions. The loan forgiveness amount is subject to reductions for certain workforce and salary reductions. The amendments extend the date by which a borrower must reverse reductions in number of employees and/or salary to December 31, 2020 in order to mitigate or eliminate loan forgiveness reductions. There are also additional exemptions relating to the inability to rehire certain employees and/or the inability to return to the same level of business. These amendments are applicable to loans already received.
- New Loans to have 5 Year Terms as Opposed to 2 Years. The SBA previously mandated 2-year loan terms for all loans. The amendments provide for loan terms of at least 5 years for new loans made after the amendments become effective. Borrowers that have already received loans will need to contact the lender to negotiate an extension.
The following is the Paycheck Protection Program loan portion of our previous Client Bulletin updated to include the proposed amendments discussed above [originally released 3/30/20, and previously updated 4/1/20 and 4/3/20].
- Eligible businesses.
In addition to businesses already eligible for SBA programs (see https://www.law.cornell.edu/cfr/text/13/121.201 for size guidelines), any business concern (include sole proprietorships), nonprofit organization, veteran organizations, and tribal small business concerns with 500 or fewer employees is eligible. In addition, businesses that are classified as Accommodation or Food Service under the NAICS (e.g., hotels, hotels with casinos, and restaurants) and do not have more than 500 employees per physical location of the business are eligible.
If your business meets the foregoing requirements, your business is eligible no matter what type of business in which you are engaged.
- Key Loan Terms.
No collateral or guarantees will be required.