Updated April 3, 2020
In response to the growing Coronavirus pandemic, the Small Business Administration (“SBA”) will make loans available to businesses that employ fewer than 500 people (and in certain instances a larger number of employees) through the new Paycheck Protection Program (“PPP”). In this post we address some of the most frequently-asked questions about the PPP, and how eligible healthcare entities can apply.
When can I apply?
Starting April 3, 2020, you can apply for and receive low interest and, in some circumstances, forgivable loans to cover your payroll and other certain expenses.
Where can I apply?
You can apply through lenders authorized to issue SBA 7(a) loans and that opt into the PPP. We are already assisting our healthcare clients in obtaining PPP loans. You can also contact your local SBA office to find a list of approved lenders in your area.
What do I need to apply?
Your lender is required to gather baseline financial information, including payroll expense verification documents (IRS Form 941 and 944), articles of incorporation and bylaws, and financial statements. To expedite the application process, you should begin assembling as much information as possible. For a full list of information that may be requested, visit this link.
Is every small business eligible?
Yes, generally. PPP loans are available to businesses that employ fewer than 500 people, however affiliates may be included in this calculation. Please contact your Husch Blackwell attorney to work through the application of the SBA’s “affiliate test.”
What can I use these loans for?
You can use your PPP loan for payroll costs, including benefits. On April 2, 2020, the SBA issued interim regulations requiring at least 75% of the loan proceeds be used for payroll costs. Importantly, you may only consider up to $100,000 of an employee’s annual compensation when calculating payroll costs. Besides payroll and benefits, PPP loans can be used for any of the following expenses incurred before February 15, 2020: interest on mortgage obligations, rent, and utilities.
What is the maximum amount of a PPP loan?
You are eligible for the lesser of: $10,000,000 and 2.5 times the average monthly payroll costs incurred during the one-year period before the date on which the loan is made. For a definition of “payroll costs,” visit this link.
How much of my loan will be forgiven?
Your PPP loan can be forgiven if you use the loan for payroll costs (excluding compensation over $100,000), interest on mortgage obligations, rent, and utilities. Additionally, the amount of forgiveness will be reduced if you reduce staff or salaries. To receive forgiveness, you must apply through your SBA lender.
Do I need to pledge any collateral or personally guarantee the loan?
No. Personal guarantees and collateral are not required for PPP loans.
What do I need to certify?
You can only receive a PPP forgivable loan, if you can certify that:
- Uncertainty of current economic conditions makes the loan necessary to support ongoing operations;
- Funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments and utility payments;
- You have no pending application for an SBA loan for the same purpose and duplicative amounts; and
- From February 15, 2020 – December 31, 2020, you have not received duplicative amounts under an SBA loan for the same purpose.
We are actively assisting our healthcare clients in seeking PPP loans, and we encourage you to act as soon as possible. Should you have any questions about PPP, other SBA programs, or any other COVID-19 related issues, please do not hesitate to contact your Husch Blackwell attorney. Here is a link to our COVID-19 resource center and our FAQ we created for the SBA program.