April 28, 2020: Treasury Department Issues New Guidance on PPP Loan Disbursement Timing and Seasonal Business Payroll Calculations
The Treasury Department issued new guidance yesterday related to the Paycheck Protection Program (“PPP”), which addresses the timing of disbursements (and the corresponding loan forgiveness period) and the loan amounts available to seasonal businesses.
The eight weeks after a PPP recipient receives its loan is period for which some, or all, of the loan expenditures could be forgiven. Determining when that eight-week period ends is critical for planning when to pay expenses and hire or rehire employees in order to maximize loan forgiveness. An interim rule issued yesterday requires each PPP loan to be disbursed in a single lump sum within ten days of approval, and clarifies that the loan forgiveness period begins immediately upon loan disbursement. For PPP loans authorized but either not disbursed or not fully disbursed by April 28, full disbursement must occur by May 8, and the eight-week period for forgivable loan spending begins (or began) on the date of the first disbursement. The interim rule also clarifies that if a borrower fails to provide all of the documentation the lender needs in order to disburse a PPP loan within twenty days of the loan approval, the PPP loan will be cancelled.
PPP loan amounts are set at 2.5 times of the borrower’s total payroll costs for a defined period. In recognition of the fact that not all seasonal businesses share the same seasonal employment peak, the Treasury Department also announced an interim ruling providing an alternate average payroll calculation period for seasonal businesses. Now seasonal businesses may request loans 2.5 times the size of either their average monthly payroll for February 15-May 10, 2019 or from any twelve-week period between May 1, 2019 and September 15, 2019. Previously, the CARES Act had only permitted seasonal businesses to take loans 2.5 times their average monthly payroll costs either for the twelve-week period beginning on February 15, 2019 or March 1-June 30, 2019.
Qualified businesses, nonprofits, veterans and tribal organizations seeking PPP loans are urged to apply as soon as possible, because the replenished PPP fund is expected to be exhausted soon. PPP applications are accepted directly by the financial institutions listed here.
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FOR MORE INFORMATION
For more information about the Paycheck Protection Program, please contact your attorney at Gravel & Shea PC or any of the following attorneys at the firm:
Chip Mason (email@example.com), Cassandra LaRae-Perez (firstname.lastname@example.org), Oliver Goodenough (email@example.com), Keith Roberts (firstname.lastname@example.org), Pauline Law (email@example.com), or Catherine Burke (firstname.lastname@example.org