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Paycheck Protection Program Updated Guidelines

The Paycheck Protection Program, signed into law, March 27, 2020 is expected to be replenished April 24, 2020. This article outlines the latest guidance on this program from the U.S. Department of Treasury.

Updated:

April 24, 2020

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Paycheck Protection Program Updated Guidelines

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The Paycheck Protection Program, as part of the Coronavirus Aid, Relief and Economic Securities Act (CARES Act) was signed into law on March 27, 2020, and a supplemental appropriation is expected to be signed into law on April 24, 2020.

The initial fund of $349 billion to be allocated to small businesses through the Small Business Administration was exhausted last week on April 16th only 14 days after the application period opened.

The newly appropriated $310 billion will replenish the Paycheck Protection Program. Many loan applications are already in the pipeline between lenders, to whom businesses must submit their applications, and the Small Business Administration, who ultimately processes the loans. The allocation of these funds is on a first-come, first-serve basis and is expected to be exhausted quickly. Therefore, interested small businesses, sole-proprietors, and independent contractors eligible for these funds should contact their lenders immediately to submit an application. Businesses who have previously submitted but missed the window through the first submission period should contact their lender immediately to ensure their application is up to date and ready for re-submission.

On April 23, 2020, the U.S. Department of Treasury released further guidance to borrowers and lenders on the Paycheck Protection Program in the form of a FAQ sheet. This document provides further clarity on pressing questions that may be applicable to agricultural businesses. We've selected a few of the most commonly asked questions below by agricultural industry members below. The full FAQ document from the U.S. Department of Treasury is provided as a resource below.

Lender Verification Guidance

Borrowers have experienced broad variation in the verification documents lenders are requiring borrowers to produce to certify their average monthly payroll costs are accurate. The recently released FAQ document from the U.S. Department of Treasury outlines that it is the responsibility of the borrower to provide an accurate calculation of payroll costs and attest to the accuracy of that calculation on their application. "Lenders are expected to perform a good-faith review, in a reasonable time, of the borrower's calculations and supporting documents concerning average monthly payroll costs."

Seasonal Businesses

If your business is seasonal and the majority of your activities take place in the spring and summer months, meaning your business was not operating at full capacity on February 15, 2020, lenders now have been offered clarity that they may more accurately depict a borrower's average monthly payroll costs using an 8-week period between February 15, 2019 and June 30, 2019. Borrowers are also given additional guidance that they may use their average employee count over this same time period to determine their number of employees. However, a borrower is also able to use the standard Small Business Administration's standard calculation based on the 12 calendar month period preceding their loan application date.

Rolling Application Guidance

Borrowers who previously filed for a Paycheck Protection Program loan based on guidance provided on April 2, 2020, "may rely on the laws, rules, and guidance available at the time of the relevant application. However, borrowers who previously submitted an application that was not yet processed may revise their application based on the clarification reflected in these FAQs." Borrowers should contact their lender to verify at what point their application is in the process before they resubmit. If, in fact, your application was not processed and will not be processed and you intend on resubmitting, your new application will be subject to the most recent guidance issued.

Forgiveness Period

Loan forgiveness in the Act is outlined for an 8-week period. Clarification has now been provided that the 8-week period will begin on the date that the lender makes the first disbursement of the PPP loan funds to the borrower. This date will be no later than 10 calendar days from the date of the loan approval.

The U.S. Department of Treasury provides additional guidance released on April 23, 2020 on the Paycheck Protection Program. This document supplements the latest version of the interim final rule published in the Code of Federal Regulations on April 20, 2020. Both documents are linked below in the resources for your reference.