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SBA Releases Additional Details on Programs to Assist Amid COVID-19

Insights into the SBA Paycheck Protection Program

Though the Small Business Administration (SBA) is still finalizing guidance documents, according to PNC, (reprinted directly from their website), their understanding of the program follows.

“The Coronavirus Aid, Relief, and Economic Security (CARES) Act was recently passed to provide emergency relief for small- to medium-sized businesses disrupted by COVID-19. The act created the Paycheck Protection Program, which will serve as an extension of the Small Business Administration (SBA) 7(a) loan program, allowing financial institutions to provide federally-backed, forgivable loans to eligible businesses.

Paycheck Protection Program Provisions:

  • Available to small- and medium-sized businesses with less than 500 employees (subject to limited exceptions), including 501(c)(3) nonprofit organizations, 501(c)(19) veterans organizations, and/or tribal businesses.
  • Loan proceeds may only be used for specific expenses, such as payroll costs, utilities, mortgage interest, rent/lease payments, group healthcare benefits, interest on existing debt and other approved efforts to retain employees.
  • Maximum loan size is up to 2.5 times average monthly payroll costs over the prior 12 months for most businesses, or over a more targeted period for seasonal businesses, but may not exceed $10 million[1].
  • Paycheck Protection Program loans do not require a personal guarantee nor collateral.
  • Loan forgiveness program offers guaranteed deferment periods of at least 6 months and no prepayment penalties.
    • The amount of forgiveness is calculated as the sum of amounts paid in the eight weeks following loan origination for: a) payroll, b) mortgage interest, c) rent and d) utilities.
  • Impacted businesses may only receive one Paycheck Protection Program loan.
  • All eligible entities impacted by COVID-19 between Feb. 15, 2020 and June 30, 2020 may apply.
  • Loans will be available through June 30, 2020, although program funding limitations may impact loan availability for those businesses applying later in the availability timeframe.

This information is preliminary and is subject to change. As the SBA continues to publish program guidance about the Paycheck Protection Program, more information will be shared to keep you informed. 

(1.)For seasonal firms, 2.5x the average monthly payroll for 12-week period starting ether Feb. 15, 2019 or March 1, 2019 (at the election of the borrower). For businesses without a full year of payroll history, 2.5x the average monthly payroll from Jan. 1, 2020 to Feb. 29, 2020.”

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