Treasury Department Announces Small Businesses Can Apply for Loans

by: Smith and Howard

April 1, 2020

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This article was updated on April 2, 2020 at 9:30 pm

ALERT: On the evening of April 2, 2020, the SBA issued an Interim Final Rule (IFR) on the Payroll Protection Program.  We expect the IFR to provide additional needed guidance and clarification on certain points for those planning to apply for SBA loans under the CARES Act, as well as for participating lending institutions. We will issue an update on April 3 as soon as we have had an opportunity to fully analyze the document.

Late in the afternoon of March 31, 2020, the U.S. Department of the Treasury released additional guidance (available here) surrounding the Payroll Protection Program. The guidance includes:

  1. Overview
  2. Application form
  3. Borrowers information sheet
  4. Lenders information sheet

Of note, the release states that small businesses and sole proprietors can begin applying April 3, 2020; independent contractors and self-employed can begin applying April 10, 2020.

Based on today’s release, the timeline to begin the application process, and the fact that there is a funding cap, if you anticipate applying for a loan under this program, we suggest you immediately begin to determine what will be needed to calculate the average monthly payroll costs of your organization and, ultimately, the loan amount.

After review and consultation with other professional service providers, we believe payroll costs include:

  • Salary, wage, commission or similar compensation
  • Payments (compensation) made to sole proprietors and/or independent contractors (1)
  • Payment of cash tip or equivalent
  • Payment for vacation, parental, family, medical or sick leave
  • Allowance for dismissal or separation
  • Payment required for provisions of group health care benefits, including insurance premiums
  • Payment of any retirement benefit
  • Payment of state or local tax assessed on employee compensation

And payroll costs exclude:

  • Portion of compensation of an individual employee in excess of an annual salary of $100,000
  • Taxes for payroll, railroad retirement and income
  • Compensation of an employee whose principal place of residence is outside the United States
  • Qualified sick and family leave wages for which a credit is due to the Families First Coronavirus Response Act

If you would like our assistance in helping you estimate the amount of loan you may qualify to apply for, we have developed a preliminary loan calculator spreadsheet.  This is our best guess based on current guidance; it could be altered based on any new guidance issued by the SBA.  Additionally, it will be impacted by the way the SBA commercial lenders review and interpret the guidance.

We expect the SBA lending community will be following up in the next few days with specific instructions once they are prepared to accept and submit applications. The SBA departments within banks will be deluged with loan requests and will need assistance from applicants’ management team and professional service providers.

For that reason, we have reached out to many banks in the metro Atlanta area to let them know that we stand ready to help our clients and community businesses navigate the process.

We will do our best to keep you up to speed with any developments, so please read the emails we are sending and respond as quickly as practical.  As always, we appreciate the opportunity to serve you and look forward finding ways to create extraordinary value for you.

(1) Note: Updated 4/1/2020 – There is some uncertainty on whether this information is required, but we have seen requests for it by some financial institutions. We strongly advise businesses to be prepared with this data before completing the application.

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