Paycheck Protection Program Application Process and Guidelines Established


By: Colleen Lyons

April 1, 2020

Earlier this week we provided an Alert concerning the Paycheck Protection Program established under the CARES Act.

On Tuesday, March 31, the US Treasury Department released the Application Form for the Paycheck Protection Program along with the following additional general guidance concerning the Paycheck Protection Program:

  1. An Overview of Small Business Paycheck Protection Program
  2. Paycheck Protection Program (PPP) Information Sheet for Borrowers 

According to the PPP Information Sheet, small businesses and sole proprietorships may begin submitting applications to existing SBA approved lenders beginning Friday, April 3, 2020 while independent contractors and self-employed individuals can begin submitting applications to existing SBA approved lenders on Friday, April 10, 2020.

According to the PPP Information Sheet, the following loan terms will apply to all PPP Loans:

  • The interest rate will be fixed at .50%.
  • All loan payments will be deferred for 6 months but interest will accrue during this period.
  • The loan term will be for 2 years but the loan may be prepaid without fees or penalty.
  • No collateral or personal guarantees will be required.

The SBA’s website has released guidance on the PPP process as well.  In addition to confirming the terms above, the SBA advises that the PPP loans will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll).  Neither the government nor lenders will charge small businesses any fees.

As explained on the PPP Information Sheet, forgiveness is also based on the employer maintaining or rehiring employees and maintaining salary levels.  Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease by more than 25% for any employee that made less than $100,000 annualized in 2019.

The PPP Information Sheet encourages interested parties to submit applications as quickly as possible because there is a funding cap and lenders need time to process the loans.

We will continue to provide updates as additional information about the PPP Loan Program becomes available.  In the interim please feel free to contact your regular Sheehan Phinney attorney with questions.