New FAQs Bring Much Clarity to the Paycheck Protection Program

Last night (Monday, April 6, 2020), the U.S Treasury and the Small Business Administration (“SBA”) released 18 answers to frequently asked questions (“FAQs”) about Paycheck Protection Program (“PPP”) loans.

The PPP is an important part of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), enacted March 27, 2020. The PPP provides loans to small to mid-sized businesses (including certain not-for-profits). Part or all of the loan may be forgiven on a tax-free basis, if the borrowing business maintains its employee count and uses the loan for specific expenditures, of which at least 75 percent must be for payroll costs.

The PPP was hastily drafted in response to the dire need for funds to keep businesses open and their employees paid during this crisis. The wording of the statute raised many questions. Last week, the SBA issued a lengthy Interim Final Rule and released the loan application (Form 2483) and instructions on April 2. Yet, many questions remained.

Lenders, primarily banks, administer the program. They were supposed to start taking loan applications on April 3. Many did so. Many more did not, earnestly protesting that they needed more than a few hours to interpret the new guidance and adapt their systems. Each bank was, for the most part, on its own when it came to deciding the guidelines for accepting, documenting, and approving the loans.

The FAQs bring much clarity to the process. For the most part, the FAQs are friendly to borrowers. They are friendly to the lenders, too, as they remove many of the impediments to quickly throwing lifelines in the forms of the PPP loans to businesses and their employees.

The FAQs did not address every possible matter. Treasury and the SBA know that. They say that the FAQ document will be updated on a regular basis.

Kudos to the Treasury, the SBA, the conscripted lenders and the advocacy groups like the American Institute of Certified Public Accountants, who have lent considerable time and talent to the cause of battling this financial crisis.

The FAQs and their answers are pretty straightforward. You can find them by clicking the button below.

If you have questions after you read the FAQs, let us know. We’ll either answer your questions or pass them along to our advocates.

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

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