Today, the day before banks (precious few banks based on what we are seeing and hearing) began taking applications for Paycheck Protection Program loans there are some changes in the program.

Last evening the Small Business Administration released an “interim final rule” (doesn’t sound too final with that description). The rule updated the application process with changes from previous discussions and differences from the text of the CARES Act. Following are the changes.

Specifies that the look-back period for determining average monthly payroll costs is the prior 12 months, which would be April 2019 through March 2020. But, of course, the application still states "for 2019." Given this contradiction and confusion we recommend you have information for both periods ready, and be prepared to provide whatever your bank requests. Each bank does have some discretion as to what they mar request.
It does not include payments made to independent contractors as "payroll costs" that determine the maximum loan amount a business may borrow. Independent contractors must apply for their own loans. This actually makes more sense.
Requires businesses to deduct federal payroll taxes (employer and employee) and federal income tax withholding from total payroll costs for the period February 15, 2020, to June 30, 2020;
Clarifies that the $100,000 cap applies to salary/wage/compensation per employee, not total payroll costs, which includes health and retirement benefits paid to/for the employee. These benefits may be added above and beyond the $100,000 cap for purposes of determining payroll costs;
Increases the interest rate applied to these loans from 0.5% to 1% (under the CARES Act language, the maximum interest rate on these loans cannot exceed 4%); and
Limits the nonprofit organizations that qualify for the loans to IRC §501(c)(3) charitable organizations or IRC §501(c)(19) veterans organizations.

It is our understanding from most of the banks and authorized lenders we’ve spoken with today that it will be anywhere from a couple of days to as long as two weeks before actual processing of these loans will begin. If you bank with multiple banks, check to see who may help you most quickly.

Given the unprecedented number of businesses that will be applying, the very short time since the Act passed (it is just now one week) do try not to be too hard on your bank. They’re to a great extent at the mercy of the many government agencies still writing — and changing — the rules for this program on a daily basis.

Would you like a one-page summary about the Paycheck Protection Program? Click here for the summary to help you see what may be available to your business.

If you would like any assistance or would like to evaluate and plan your business’s options and opportunities through these changing economic times the team at Scholl & Company is here to help you. Call us at (831) 758-5966 or email help@schollcpa.com.