The Treasury Department released additional information today regarding the Paycheck Protection Program that has been authorized under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The materials include an information sheet that summarizes the terms and application process for borrowers, an application form for PPP loans, and an information sheet for lenders and agents.
The borrower information sheet largely summarizes terms that are contained in the CARES Act. For a discussion of those terms, see our updated Practical Guide for Small Businesses to Obtain a Paycheck Protection Loan Under the CARES Act. However, the information sheet sets out a fixed interest rate of 0.5%, which is significantly less than the maximum of 4% specified in the Act. The information sheet also sets the term of the loans at two years, significantly less than the maximum of ten years specified in the Act. It is unclear whether lenders will find these terms, particularly the interest term, to be sufficiently attractive to process the volume of loans that will be needed under the program.
The full text of the borrower information sheet is available here.
The application form is fairly straightforward and largely follows the requirements in the Act. However, it does include several representations by the borrower, including one surprising representation—that to the extent feasible, the borrower will purchase only American-made equipment and products. This requirement is not contained in the CARES Act. The form also contains the certifications required by the CARES Act (including a certification that the current economic uncertainty makes the loan request necessary to support the ongoing operations of the borrower), a limited set of background check questions, and questions relating to calculation of the loan. Borrowers will be required to provide tax documents to be used for calculating the amount of the loan, which is based upon average monthly payroll.
The application form is available here.
The information sheet for lenders confirms that in addition to existing Small Business Administration (SBA) lenders, all federally insured depository institutions, federally insured credit unions and Farm Credit System institutions are authorized to participate in the program. It also states that “a broad set of additional lenders” will be able to make loans once they are approved. It provides an email address for submission of applications by additional lenders, but does not include a link to an application form.
The information sheet discusses underwriting requirements, which follow the requirements set out in the CARES Act and include compliance with Bank Secrecy Act requirements. The information sheet also sets out some guidance for agents that want to assist banks and borrowers in applying for PPP loans (including amounts of fees and how they may be charged), and confirmation that PPP loans may be sold in the secondary market.
The full text of the lender information sheet is available here.