News, Insights & Events
COVID-19: Paycheck Protection Program – Forgivable Loans for Businesses under SBA 7(a) Program
March 31, 2020
Jeff Baxter, Dickinson Mackaman Tyler & Hagen PC
Under the recently Coronavirus Relief Bill that was passed by the Senate, and is expected to pass the House and be signed by the President, a new Paycheck Protection Program has been introduced which will provide small businesses (500 or less employees), and includes sole proprietorships, non-profits and charities, the ability to obtain loans to cover eligible expenses during the Coronavirus epidemic. For multi-location and franchisees, the employee limit is per location, and franchise restrictions have been waived.
The loans will be under an extension of the SBA 7(a) loan program, with many of the normal restrictions and regulations waived during the relevant period, including the waiver of guarantees and collateral requirements, and the waiver of the regular “credit elsewhere” requirement. This means that funding is available for businesses that would otherwise have access to alternative credit sources. The amounts of these loans will be guaranteed by the US Government.
The Program includes a forgivable element which will forgive the portion of the loan that is used for the purposes of payroll (for employees making less than $100,000 annually), rent, mortgage on real and personal property and utilities for an eight-week period. Employees that have been terminated previously due to the epidemic are eligible for rehire and payments under the Program.
Understand that these provisions are fluid, and subject to Amendments from the House. Please look out for updates as this legislation is approved by the House and signed by the President. There will also be regulatory frameworks developed by the SBA that may impact specific terms and processes for the institution and rollout of this new program. If you have any questions about this or any of the other programs available to your business during the Coronavirus pandemic, please contact us for assistance.