There is very little difference between the prior program and the current program. It is really just an extension with some restrictions for well-funded companies.
1. Applications are first come, first served. Loans are being processed on a first come, first served basis. The first round of funds was allocated in less than two weeks. Any business or individual considering a PPP loan should submit a PPP application as soon as possible. If your bank is dragging their feet, try another bank. PPP loans are available through banking institutions, credit unions and even PayPal or Square. While some institutions require that a business have an existing relationship in order to apply, this is not a requirement of the SBA or the federal government. Please check the SBA website for a current list of lenders.
2. Businesses with 500 or fewer employees are eligible. PPP loans are available to any business with 500 or fewer employees. There are other eligibility criteria that apply specifically to PPP loans. Speak to your lender to ensure you satisfy the criteria prior to submitting an application and that you are not barred by any new requirements concerning liquidity of assets.
3. Independent contractors and sole proprietors can apply. Self-employed individuals such as independent contractors or sole proprietors are eligible for a PPP loan if they were in operation on February 15, 2020, have self-employment income, and meet certain other criteria.
4. Businesses can obtain loans to cover payroll and other limited expenses and those loans can be fully forgiven: Businesses and self-employed individuals can obtain loans of up to 2.5 times the average of their monthly payroll expenses, up to a cap of $10 million. Loan proceeds can be used to cover payroll, mortgage interest, rent and utilities during the 8-week period after your loan is funded. PPP loans can be fully forgiven if you pay a substantially similar number of employees during the 8-week forgiveness period and at least 75% of the loan proceeds are used to cover payroll costs. If a business uses less than 75% for payroll, the amount of loan forgiveness will be reduced accordingly, and any amounts that are not forgiven will convert to a loan with a 1% interest rate. Loan payments will be deferred for six months, though interest will continue to accrue over this period. The loan must be repaid within two years from the date of distribution.
5. If you use PPP funds for unauthorized purposes, SBA will direct you to repay those amounts. If you knowingly use the funds for unauthorized purposes, you will be subject to additional liability such as charges for fraud. If one of your shareholders, members, or partners uses PPP funds for unauthorized purposes, SBA will have recourse against the shareholder, member, or partner for the unauthorized use.
6. Businesses are permitted to obtain both a PPP Loan and an Economic Injury Disaster Loan (EIDL). A business may apply for both loans but cannot use them for the same purposes. Eligibility criteria is similar for both PPP and EIDL loans but the EIDL is not totally forgivable. However, the SB A has said it is not accepting new EIDL applications as the new funding will likely be used by the current applications.
Battling the novel Coronavirus is difficult for everyone. We are here if you need us. With best wishes for your, and your family’s, health and safety.
Gregory S. Lisi, Esq.
Partner-in-Charge, Employment & Labor practice group
GLisi@Forchellilaw.com | 516.248.1700