Contact Your Banker Now To Apply For The PPP Loan

Yesterday evening (March 31, 2020), the Small Business Administration released the Paycheck Protection Program (“PPP”) loan application form and information sheets for borrowers and for lenders. We include below a link to each of these three items on the SBA website.

The PPP is part of the of the CARES Act, signed into law on March 27, 2020. The program is administered by SBA 7(a)-certified lenders and by other federally insured depository institutions, federally insured credit unions, and Farm Credit System institutions that are participating in the PPP. You can read our summary of the PPP on our website by clicking here.

The actual application form is two pages long and has the result of one calculation on the face of the form. There are less than two additional pages of the form that include instructions and disclosures.

Lenders are required to verify only three things.

The borrowers information sheet contains at least four new considerations. The interest rate on loans to borrowers is 0.50%, as compared to the maximum rate of 4% stated in the PPP. The loan matures in two years, as opposed to the maximum term of 10 years under the PPP. A six-month payment deferral is prescribed, which is the minimum deferral period in the law. Importantly and out of the blue, the SBA adds an “anticipated” requirement to the statutory forgiveness of part or all of the loan. The SBA says on the borrowers sheet that “due to high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.”

The borrowers sheet says that small businesses and sole proprietorships can apply for loans starting April 3, 2020. Independent contractors and self-employed individuals can apply for loans starting April 10, 2020.

We communicated yesterday with several bankers whose banks will be participating in the PPP. Our overall take-away is that most banks first will be taking care of the existing customers. If time, resources and available funding allow, they may extend the PPP to new customers. Knowledgeable observers expect that the $349 billion appropriated for this SBA lending program will be swiftly disbursed. Whether future law will continue the program and increase available funds is uncertain.

So, if your business or not-for-profit is eligible for a PPP loan, you need to contact your banker now to confirm that the bank is participating in the PPP and in order to secure a place in line. Be sure that you understand that institution’s application process. While the application process could be nearly uniform across lending institutions, you should not assume that it will be.

We can help you prepare your application. Please contact your HM&M advisor, who will put you in touch with our COVID-19 Crisis Response Team.

For more information check out HM&M’s COVID-19 Resources page.

HM&M COVID-19 Resources