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Update on Paycheck Protection Program Loans Available Under the CARES Act

Update on Paycheck Protection Program Loans Available Under the CARES Act Background Decorative Image

Updated April 3, 2020

On April 2, 2020, the Small Business Administration (the “SBA”) issued an Interim Final Rule (the “Rule”) announcing the implementation of the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The Rule will become effective immediately, but interested parties may submit comments. The Rule can be found here.

Highlights of the Rule include:

  • PPP loans will be first-come, first-served
  • The SBA intends to promptly issue additional guidance with regard to the applicability of affiliation rules at 13 CFR §§ 121.103 and 121.301 to PPP loans
  • The interest rate of a PPP loan will be 1%
  • The maturity of a PPP loan will be 2 years
  • No payments are required for 6 months following the date of disbursement of the PPP loan; however, interest will accrue during this 6-month deferment
  • Loan forgiveness can be up to the full principal amount of the PPP loan plus any accrued interest
  • Independent contractors do not count as employees for purposes of a business borrower’s PPP loan calculations
  • The SBA will allow lenders to rely on certifications of the borrower in order to determine borrower’s eligibility for a PPP loan and use of loan proceeds and to rely on specified documents provided by the borrower to determine qualifying loan amount and eligibility for loan forgiveness
  • Lenders will be held harmless for borrowers’ failure to comply with program criteria

The Rule also provides further detail and examples on the calculation of both the maximum loan amount and the amount eligible for forgiveness.


First published April 1, 2020

On Tuesday, March 31, 2020, the Small Business Administration (the “SBA”) published a sample loan application form for SBA lenders to use for the Paycheck Protection Program (the “PPP”). The form can be found on the Treasury website here.

The Department of the Treasury also published guidance on the PPP on Tuesday. The Treasury guidance can be found here. General information, additional details, and resources can be found on the Treasury’s website.

SBA lenders are expected to start taking applications for PPP loans on Friday, April 3. The $349 billion in funds earmarked for this program are expected to be distributed to eligible recipients very quickly.

Potential PPP recipients should identify SBA lenders. The 100 most active SBA lenders are identified on the SBA’s website here.

Finally, potential recipients should weigh the tradeoffs in receiving a PPP loan, including becoming ineligible for certain employer tax credits and other financial assistance under the CARES Act.

Please visit our Coronavirus: Preparation & Response series for additional resources we hope will be helpful.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.