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SBA Issues Additional Paycheck Protection Program (PPP) Loan Guidance and Resources

On April 14, 2020, the U. S. Small Business Administration issued the following additional guidance for the Paycheck Protection Program (PPP) loan and provided an update to the PPP Frequently Asked Questions.

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On April 14, 2020, the U. S. Small Business Administration issued the following additional guidance for the Paycheck Protection Program (PPP) loan and provided an update to the PPP Frequently Asked Questions.

On April 14, 2020, the U. S. Small Business Administration issued the following additional guidance for the Paycheck Protection Program (PPP) loan and provided an update to the PPP Frequently Asked Questions:

The additional eligibility criteria and requirements for certain pledges of loans covers three areas:

  1. Individuals with self-employment income who file a Form 1040, Schedule C
  2. Clarification regarding eligible businesses
  3. Requirements for certain pledges of PPP Loans

This guidance provided the following clarification regarding self-employed individuals and partners in a partnership:

  • A partner in a partnership may not submit a separate PPP loan application as a self-employed individual
  • The self-employment income of general active partners may be reported as a payroll cost, up to $100,000 annualized, on a PPP loan application filed by or on behalf of the partnership (i.e. inclusion of guaranteed payments)
  • Defined the maximum loan calculation for self-employed individuals with and without employees
  • Limits Schedule C income to $100,000
  • Requires a 2019 Schedule C to be provided – Filed or proforma (if 2019 tax return hasn’t been filed)
  • Defined the loan forgiveness calculation for self-employed individuals with and without employees
  • Mortgage interest payments include both real and personal property for loan forgiveness purposes
  • Rents include buildings, equipment, vehicles, etc. for loan forgiveness purposes

These provisions provide possible insight into the pending loan forgiveness guidance for all other businesses.

In addition, the frequently asked questions updated through April 14, 2020 provided additional clarification for both lenders and borrowers.  Some items of note included:

  1. Question 7 – $100,000 limit doesn’t apply to benefits when determining payroll costs for the calculation of loan amount
  2. Question 14 – Time period – You can use calendar year 2019 or trailing twelve months from the application date
  3. Question 14 – Number of employees – you can use average employees in your calculation
  4. Question 16 – Gross payroll should be utilized and not net payroll
  5. Question 17 – No need to refile an application for these changes noted above
  6. Question 20 – The eight-week period begins on the date the lender makes the first disbursement of the PPP loan to the borrower

We will continue to keep you apprised as additional information and guidance is provided. If you have specific questions, please reach out to your blum partner or contact us here.

 

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Disclaimer:  The contents of this resource are for general informational purposes only. While every effort has been made to ensure its accuracy, the information is provided “as is” and no representations are made that the content is error-free. We have no obligation to update any content, comments or other information for retroactive or prospective interpretations or guidance provided by regulators, financial institutions or others. The information is not intended to constitute legal advice or replace the advice of a qualified professional. There are areas of the CARES Act where additional clarification from the Treasury Department and the SBA is needed. Your judgment and interpretation of the act may be needed. Users should consult with their legal counsel and representatives of the lending institution regarding the proper completion of their application and supporting documentation.

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