UPDATE: Small Business Relief Loans – CARES Act v. SBA Disaster Relief

UPDATE: Small Business Relief Loans – CARES Act v. SBA Disaster Relief

The SBA CARES Paycheck Protection Program (“PPP”) has evolved quite a bit since it was passed into law just one week ago.  After providing preliminary rules and guidelines earlier this week, the Small Business Administration (“SBA”) issued its interim final rules yesterday afternoon April 2nd.

Here are some of the big changes reflected in these interim final rules, which may differ from previous PPP summaries that you have seen:

  • Interest Rate Increase: The interest rate is increased from 0.5% to 1.0%. This interest rate will be applied to any loan proceeds that are not forgiven under the PPP guidelines.  Loan re-payments of interest and principal will be deferred for six (6) months, but interest will begin accruing at 1.0% immediately after the loan is disbursed and accrued interest will be the responsibility of the small business borrower if the loan is not forgiven.
  • Authorized Uses: At least 75% of the loan proceeds MUST be used for payroll costs. In other words, a maximum of 25% of the loan proceeds may be used for other authorized purposes like rent, utilities, mortgage interest, or loan interest.  Small businesses can use 100% of the loan proceeds for payroll purposes if they choose to.
  • Documents to Submit: Applicants for PPP loans must submit SBA Form 2483 (the PPP Application Form) and payroll documentation to demonstrate that your small business was in operation with employees prior to February 15, 2020 (these documents include payroll processor records, payroll tax filings, Form 1099-MISC for independent contractors seeking PPP relief, or income and expenses for a sole proprietorship seeking PPP relief).

Please reach out to Kennyhertz Perry if you need assistance navigating these programs.

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