The Small Business Administration (SBA) recently published an interim final rule that announces the implementation of sections 1102 and 1106 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
Section 1102 of the law temporarily adds a new product, titled the “Paycheck Protection Program,” (PPP) to the SBA’s 7(a) loan program. Section 1106 provides for forgiveness of up to the full principal amount of qualifying loans guaranteed under the PPP.
- The interest rate is 1% (change from prior information).
- Maturity rate is two years. (The CARES Act allowed a maximum maturity of up to 10 years, but the administration now says two years is sufficient.)
- Payments are deferred for six months, but interest will be accrued from date of disbursement. (Originally, the legislation allowed up to one-year deferment.)
- The PPP loan can be forgiven up to the full principal and accrued interest if the borrower uses all of the loan proceeds for forgivable purposes and employee and compensation levels are maintained. However, not more than 25% of the loan forgiveness amount may be attributable to nonpayroll costs. (This is change from prior communication.) The SBA will issue additional guidance on loan forgiveness.
- Questions on the PPP may be directed to the Lender Relations Specialist in the local SBA field office, information for which is online.