On March 31, 2020, the Department of Treasury released preliminary guidelines (“Guidelines”) for prospective participants in the Paycheck Protection Program (“PPP”), a cornerstone of the newly enacted CARES Act. Per the publicly released Information Sheet, small businesses and sole proprietors are eligible to apply for a PPP loan starting on Friday, April 3, 2020, and independent contractors and self-employed individuals can submit applications starting on Friday, April 10, 2020.  Among other things, the Guidelines serve to specify the terms of PPP loans, fixing the interest rate at 0.5% and setting a two-year term for outstanding amounts not otherwise forgiven.  The computation of “payroll” costs is to be based on 2019 data, not the trailing twelve months (with the exception of seasonal borrowers with a different period). As recited by the CARES Act, proceeds of any PPP loan should be used to fund payroll costs, interest on mortgage obligations incurred before February 15, 2020, rent under lease agreements in force before February 15, 2020, and utilities for which service commenced prior to February 15, 2020. For additional detail, our comprehensive client alert on the PPP and other components of the CARES Act is available here.

Funds available under this program are capped and are expected to be in high demand. Interested applicants should apply directly through a designated SBA lender as soon as permissible, by completing the Paycheck Protection Program Application Form linked here.