Paycheck Protection Loan Program

As promised by an earlier post, Emergency Economic Injury Disaster Loans (EIDL), the Emergency Assistance Bill that passed the Senate today will, if passed by the House, contain a Paycheck Protection Loan Program that could provide short-term and long-term relief to many small businesses.

1. Increased Eligibility

Eligibility requirements have expanded for small businesses. Sole Proprietors, Independent Contractors, and Self-Employed Individuals may also be eligible if certain documentation is submitted (e.g. payroll tax filings, 1099-MISC forms, etc.).

2. Maximum Loan Amount

The maximum loan amount will be the lesser of:

(i) The average total monthly payments incurred during the 1-year prior to filing multiplied by 2.5, plus the outstanding amount of any economic injury disaster loan that will be refinanced with the new loan; or

(ii) $10,000,000.

3. What can the loan be used for?

An eligible recipient may use the loan for:

(i) Payroll costs;

(ii) Costs related to the continuation of group health care benefits during the periods of paid sick, medical or family leave, and insurance premiums;

(iii) Employee salaries, commissions, or similar compensations;

(iv) Payments of interest on any mortgage obligation (which shall not include any prepayment of or payment of principal on a mortgage obligation);

(v) Rent (including rent under lease agreement);

(vi) Utilities;

(vii) Interest on any other debt obligations that were incurred before the covered period.

4. Borrower Requirements

Eligible recipients are required to make a good faith certification to the following:

(i) That the uncertainty of current economic conditions makes necessary the loan request to support ongoing operations;

(ii) Funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments;

(iii) That recipient does not already have an application pending for a loan under this subsection for the same purpose and duplicative amounts applied for; and

(iv) Between February 15, 2020 and December 31, 2020, recipient has not received amounts under this subsection for the same purpose and duplicative of amounts applied for or received under a covered loan.

5. Waiver of Personal Guarantee Requirement

With respect to a covered loan, no personal guarantee or collateral will be required.