SBA Loans Video 7--Paycheck Protection Program Frequently Asked Questions

Attorney Thomas B. Burton discusses the latest developments and FAQs with the Paycheck Protection Program on Monday, April 13th and discusses tips and guidance that borrowers should keep in mind when completing and submitting their Paycheck Protection Program Loan application.


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Transcript of Video: SBA Loans Video 7—Paycheck Protection Program Frequently Asked Questions

Okay, welcome back this is attorney Thomas Burton and today is already the seventh video in my SBA loan series, can you believe that today? I want to talk more about updates to the paycheck protection program, so I just got off an hour and 15-minute webinar with lawyers and CPAs all over the country and they were unpacking the latest development and the paycheck protection program and how they affect your small business and much of this information, if you've been watching my videos is a review of some of what you and I have walked through over the past couple weeks but they put it all into one hour 15 minutes webinar and as you've noticed watching the videos with me some of this guidance receiving from treasury and SBA has been changing as we go along and several of the lawyer and CPA on the call, they were making the comment that they haven't this is such a fast developing program, this is not like normal if you will IRS rules things are changing fast and they made the point to those of us who are professionals like myself and other lawyers accountants, we're used to we want finality in the law and we get very detailed to do a good job for our clients, but in this case because SBA keeps changing things the best advice they're giving is if you're interested in this program get that application submitted and get it in under the rules in place as of today's date and we’ll go from there and we'll know about the loan forgiveness portion coming in eight weeks but we're going to have to work through that as they come out with more guidance and I know the one presenter said the SBA is playing much faster and looser if you will with the rules than the IRS with the statutes they try to follow the statute and if feel recall in one of my early videos.

I went through the Cares Act and talked about the loan forgiveness and they specifically brought up how SBA now is saying 75% of it needs to be used for payroll but I don't see that anywhere in the Cares Act in these two presenters said the same thing so that SBA guidance and rulemaking authority and we'll have to see if down the road that holds up in court in terms of are they allowed that much discretion, but I would follow the guidance to be on this safe side for your own application, so I'm going to run through a couple quick hits from the webinars some things. I wanted to emphasize with clients today. One thing to point out is to the banks there is no personal guarantee on this paycheck protection loan, okay, but look through your loan documents if and when you get to the closing with your banker and make sure there's not a personal guarantee in those loan documents because one of the presenters made the point that the banks are reacting so fast, they may be using their other forms they normally use for a business loan where there would be a personal guarantee in there and you really want to make sure when you're signing that consistent with the cares act, there is no personal guarantee required for this type of paycheck protection loan, so don't sign paperwork saying you're personally guaranteeing the loan and if you need help with that you should have your attorney review that closing paperwork before you sign.

Okay, so they specifically brought that up and I noticed today. I've got a new link in this video to the latest SBA frequently asked questions and they updated them again April 10th, but that link will go to Treasury.gov and you should keep checking those for guidance as we go but they ask this is a new question they added someone has do lenders have to use a promissory note provide by SBA or may they use their own and this is the answer from SBA lenders may use their own promissory note or an SBA form of promissory note, so again that's just what they're saying be careful that your loan documents don't contain that personal guarantee, it's not required under the Cares Act in the law don't sign one if a personal guarantee is in there bring it up to your banker and tell them consistent with the Cares Act, there's no personal guarantee on the loan and I don't want to be pledging personal assets for this business loan okay, so that's a big takeaway, make sure you look through your loan paperwork carefully if you get to that point when you sign it. And there's also another question here.

I wanted to bring up today this is the question I filed or approved a loan application based on the version of the PPP interim final published on April 2nd 2020 do I need to take any action based on the updated guidance in these frequently asked questions so they up they publish those interim final rules and April second and as you know, the application opened over two weeks ago last Friday opened for sole proprietors and the Friday before I should say opened to larger businesses, so what if you, filed your application as I help some clients do on the first day that SBA says borrowers and lenders may rely on the laws rules and guidance available at the time of the relevant application, however borrowers whose previously submitted loan applications have not yet been processed May revise their applications based on clarifications reflected in these frequently asked questions.

So basically again with what I was hearing on the webinar today lawyers, we want to make sure everything is correct and done the right way but in the search for answers that can take time and some of this is there aren't the answers out there like for example two Fridays ago on in April and some of these answers now they're clarifying but if you put your application in on that date, it should be viewed based on the guidance on that date. Now if you haven't closed on the loan and there's something new you picked up you want to update SBA is saying go ahead and do that. But that's why it's important here, if you're thinking about this loan my advice is to get the application submitted get it completed and get it in because again, they're saying it's first come first serve on this program and we have here in the frequently asked questions that they're going to borrowers and lenders may rely on the laws rules and guidance available at the time of the relevant application.

So if your lender is slow walking your application I would call their attention to that guidance from the SBA because I know some lenders are talking about they think there's more guidance coming from the SBA and while I think that's true there's in general always more guidance coming but that doesn't mean they can wait forever on your application because with the first come first served rule by SBA we want to get that process right before the funds would run out. So again, I'm looking to out for the borrowers interests here and you want to get your application submitted and provide all the documentation your lender asks, but then I would encourage you to keep encouraging them to process your application.

Now again, remember there's that eight-week period you can apply for the loan forgiveness to use the funds for and in general again that's for payroll and utilities and rent. One other thing from today's webinar and there's been confusion over this the host generally agree with me, you can apply for both the economic injury disaster loan and the paycheck protection loan.

They are saying it doesn't mean you can do one and not the other but you can't use the funds for the same thing. And again, the EIDL you can only receive up to two million the limit on that one the paycheck protection program the limit is 10 million. If you do apply for the EIDL and you get the emergency advance, they're saying that $10,000 emergency advance can be a grant and not need to be repaid.

So look at both programs carefully and evaluate which one makes the most sense for your business. Now, if you're a business that isn't or can't take advantage of the PPP or isn't going to be aware there's some employee side tax credits in the law as well. But again if you apply for PPP and do the loan forgiveness under there, then those tax credits are not available.

So I wanted to get this new video out to you today on the updates to the paycheck protection program while it's fresh in my mind and after the latest information. I just received discussing this with thought leaders all over the country, so again check out the SBA link in this video.

Stay safe be well and we'll see you next time.

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Transcript and captions provided for ease of access for the hearing impaired.

For questions about this topic, or to suggest a topic for a future blog post, please contact my office.



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