April 08, 2020 Update – CARES Act Loan Programs for Businesses
KEEPING YOU INFORMED…
On April 6, the U.S. Small Business Administration (SBA) released additional guidance on loans under the Paycheck Protection Program (PPP) authorized as part of the economic stimulus package pursuant to the CARES Act. The guidance, which can be found at sba.gov/sites/default/files/2020-04/Final%20PPP%20FAQs.pdf, is in the form of answers to frequently asked questions about the PPP loan application and the Interim Final Rule effective April 2, 2020 (sba.gov/document/policy-guidance—ppp-interim-final-rule). This memorandum discusses some of the answers to the questions that our clients have asked the most.
The guidance clarifies that the exclusion of compensation in excess of $100,000 annually applies only to cash compensation and not to non-cash benefits, including employer contributions to defined-benefit or defined-contribution retirement plans, payment for the provision of employee benefits consisting of group health care coverage (including insurance premiums) and payment of state and local taxes assessed on employee compensation. The guidance also clarifies that payroll costs are not reduced by federal withholding taxes imposed on an employee nor do they include amounts paid by the employer’s for the employer’s share of payroll tax.
The guidance states that borrowers must apply the affiliations rules set forth in the SBA’s Interim Final Rule on Affiliation (found at sba.gov/document/policy-guidance—ppp-affiliation-interim-final-rule) when making a PPP application and that a borrower must certify in its application that it is eligible to receive a PPP loan. The guidance also sets forth the circumstances under which a minority shareholder who waives certain of its rights may not be considered an affiliate of a borrower’s business.
If a borrower has already submitted its application for a PPP loan, the guidance states that borrowers and lenders may rely on the laws, rules and guidance available at the time of the borrower’s application. If a borrower’s previously submitted application has not yet been processed, a borrower may revise its application based on the clarifications reflected in this latest guidance.
We hope that you and your families are well and staying healthy. If you have questions about any of these loan programs, please contact Jeff Zankel, Steve Godsberg, Patricia Delaney or one of our other attorneys at the direct dial number or email address indicated on the contact information page attached to this memo.
THIS MEMORANDUM IS MEANT TO ASSIST IN THE GENERAL UNDERSTANDING OF THE CURRENT LAW. IT IS NOT TO BE REGARDED AS LEGAL ADVICE. THOSE WITH PARTICULAR QUESTIONS SHOULD SEEK THE ADVICE OF COUNSEL.
© Lamb & Barnosky, LLP 2020