On Monday, the US Treasury updated its Frequently Asked Questions (“FAQ”) guidance document on the Paycheck Protection Program (“PPP”) that was established under the federal CARES Act. The PPP provides forgivable loans to small businesses to help cover costs and prevent employee layoffs, and is available through Small Business Administration (“SBA”) lenders. Businesses and organizations impacted by the COVID-19 pandemic are currently scrambling to receive funding through this program, so this additional information is welcome.
Perhaps most importantly, the Treasury has answered the biggest question PPP applicants are asking right now – how long will it take for the loans to be disbursed? This new guidance clarifies that lenders must make the first disbursement of the loan no later than ten calendar days from the date of loan approval.
Here are a few of the other program details that were clarified in the Treasury’s update:
- The portion of a PPP loan that is forgivable is based the borrower using the loan proceeds to cover payroll and other allowable costs over an eight-week period – this guidance clarifies that that eight-week begins on the date the lender makes the first loan disbursement to the borrower.
- The CARES Act requires that PPP borrowers exclude payroll costs for employees that are in excess of $100,000 annually. The Treasury has now specified that this exclusion applies only to cash compensation, not to non-cash benefits like retirement contributions, health care coverage, etc.
- The SBA’s Interim Final Rule requires that PPP lenders confirm the applicant’s average monthly payroll costs, and now this guidance clarifies that that confirmation does not mandate that lenders replicate all of the borrower’s calculations. Instead, lenders are expected to perform a good faith review of the application and its supporting documentation and may rely on the borrower’s representations.
- For franchise businesses, if a franchise brand is included in the SBA’s Franchise Directory, each of that brand’s franchisees can apply for a PPP loan. Those franchisees must still meet the PPP’s applicable size standards to be eligible, however.
The guidance document is available on the US Treasury’s website and includes answers to twenty-five FAQs including those highlighted above. Lenders interested in participating in the PPP program will likely find this guidance especially informative, as it answers several questions regarding the logistics of the loan program.