On April 3, 2020, the Paycheck Protection Program (PPP) application opens to borrowers. As previously reported in our Alert, the program is intended to support small businesses, sole proprietors and independent contractors that have been disproportionately impacted by COVID-19.
In anticipation of the surge in applications, the SBA provided further guidance and updates to the program as well as a revised application form, including:
- Clarifying the documentation required by sole proprietors and independent contractors.
- Intention to promptly issue additional guidance with regard to the application of the affiliation rules at 121.103 to 121.301.
- Cannabis companies explicitly excluded.
- Clarifying that 12 months for calculation of payroll cost is for the last preceding 12 months.
- Noting that independent contractors do not count for purposes of PPP loan calculation. In addition, independent contractors do not count as employees for purposes of PPP forgiveness.
- Updating the interest rate to 1%.
- Allowing e-signatures or e-consents regardless of owners.
- Not more than 25% of the loan forgiveness amount may be attributable to nonpayroll costs.
With respect to the application form and the difficult issue of affiliation, the applicant is now required to provide information regarding itself and its owner, and either's ownership of any other business and any common management:
- The application form also provides more detail regarding the $100,000 employee cost limitation and provides that, for purposes of calculating “Average Monthly Payroll,” most applicants will use the average monthly payroll for 2019, excluding costs over $100,000 on an annualized basis for each employee.
- The holders of 20% or more of the business are no longer required to sign the application, but are listed on the application.
About Duane Morris
Duane Morris has created a COVID-19 Strategy Team to help organizations plan, respond to and address this fast-moving situation. Contact your Duane Morris attorney for more information. Prior Alerts on the topic are available on the team’s webpage.
For Further Information
If you have any questions about this Alert, please contact Nanette C. Heide, Sandra G. Stoneman, any member of the COVID-19 Strategy Team or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.