The US Department of Treasury announced that the $349 Billion Paycheck Protection Program is expected to be up and running by April 3, 2020, with Treasury Secretary Mnuchin stating that “Treasury and the Small Business Administration expect to have this program up and running by April 3rd so that businesses can go to a participating SBA 7(a) lender, bank, or credit union, apply for a loan, and be approved on the same day.”
The April 3 start date applies to small business and sole proprietorships. On April 10, 2020, independent contractors and self-employed individuals can apply. Since there is a funding cap, the Treasury is encouraging all to apply once the start date arrives.
The new loan program will help small businesses with their payroll and other business operating expenses. It will provide critical capital to businesses without collateral requirements, personal guarantees, or SBA fees – all with a 100% guarantee from SBA. All loan payments will be deferred for six months. Most importantly, the SBA will forgive the portion of the loan proceeds that are used to cover the first eight weeks of payroll costs, rent, utilities, and mortgage interest. Additionally, the new loan program will be available retroactive from Feb. 15, 2020, so employers can rehire their recently laid-off employees through June 30, 2020.
Overview of loan terms & conditions
- Eligible businesses: All businesses, including non-profits, Veterans organizations, Tribal concerns, sole proprietorships, self-employed individuals, and independent contractors, with 500 or fewer employees, or no greater than the number of employees set by the SBA as the size standard for certain industries
- Maximum loan amount up to $10 million
- Loan forgiveness if proceeds used for payroll costs and other designated business operating expenses in the 8 weeks following the date of loan origination (due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs)
- All loans under this program will have the following identical features:
- Interest rate of 0.5%
- Maturity of 2 years
- First payment deferred for six months
- 100% guarantee by SBA
- No collateral
- No personal guarantees
- No borrower or lender fees payable to SBA
Here is a pdf of the Treasury prepared one page overview of the Paycheck Protection Program.
To gain an understanding of the type of information that applicants will be required to show to their bank, here is a sample form of the application for a loan pursuant to the Paycheck Protection Program.