Updates to the Paycheck Protection Program

Apr 3, 2020

UPDATE MAY 1: The SBA has released additional guidelines and updates to their FAQ.

Please note the following:

To preserve the limited resources available to the PPP program, and in light of the previous lapse of PPP appropriations and the high demand for PPP loans, businesses that are part of a single corporate group shall in no event receive more than $20,000,000 of PPP loans in the aggregate. For purposes of this limit, businesses are part of a single corporate group if they are majority owned, directly or indirectly, by a common parent.

It is the responsibility of an applicant for a PPP loan to notify the lender if the applicant has applied for or received PPP loans in excess of the amount permitted by this interim final rule and withdraw or request cancellation of any pending PPP loan application or approved PPP loan not in compliance with the limitation set forth in this rule. Failure by the applicant to do so will be regarded as a use of PPP funds for unauthorized purposes, and the loan will not be eligible for forgiveness. A lender may rely on an applicant’s representation concerning the applicant’s compliance with this limitation.

To further ensure PPP loans are limited to eligible borrowers in need, the SBA has decided, in consultation with the Department of the Treasury, that it will review all loans in excess of $2 million, in addition to other loans as appropriate, following the lender’s submission of the borrower’s loan forgiveness application. Additional guidance implementing this procedure will be forthcoming.


The SBA will resume accepting PPP loan applications on Monday, April 27 at 10:30 a.m. EST from approved lenders on behalf of any eligible borrower.  If you have already applied, you can check on the status by calling 1-800-659-2955 24 hours a day, although expect significant wait times.


It appears that Congress is headed towards an agreement to replenish the Paycheck Protection Program with what could be an additional $250 Billion Dollars. Businesses who wish to apply for a PPP loan, but missed the initial funding for the program should be applying today to try and capitalize on this new funding.*
As was the case initially, loan approval and funding is first come first served and, unfortunately, it is not clear when and to what extent funding will be available. Despite these unknowns, the very favorable terms of these loans, including the potential for full loan forgiveness if certain conditions are met, make them a very strong option for many small businesses (those under 500 employees unless they fall into other specific categories). Accordingly, a head start on the application process is recommended.
If you have questions regarding PPP loans, other new loan programs or any other legal issue, please call your Towne, Ryan & Partners attorney for guidance.
*The loan process is managed by lenders directly. TRP makes no guarantees regarding the loan process, including but not limited to, loan eligibility or lender approval of loan application or of application acceptance. TRP is not a loan agent and does not process loan paperwork or otherwise conduct business with the Small Business Administration.

UPDATE APRIL 16: The SBA has posted the following notice:

Notice: Lapse in Appropriations: The SBA is currently unable to accept new applications for the Paycheck Protection Program based on available appropriations funding.

UPDATE APRIL 7, 2020: The SBA release an FAQ explaining finer provisions of the Paycheck Protection Program. View it: here

As of April 3, 2020, the Small Business Administration (“SBA”) has issued its regulations regarding the Paycheck Protection Program (“PPP”). A full copy of the regulations and they can also be found: here.  The immediately important information starts on page 5. These new regulations, and how the SBA is interpreting the law, may impact your submission and may ultimately affect how the loans are to be administered.  Please read the entire regulations for a full understanding of the PPP loan program.  The regulations and the SBA interpretations contains elements that are at odds with apparent legislative intent regarding implementation.

The regulations give purported clarification and interpretation of the PPP law together with exact examples of the following which may be useful such as:

  • How you determine if you qualify;
  • How to calculate the maximum amount that can be borrowed;
    • Significant clarification that Independent Contractors are NOT to be included in the calculations regarding the amount of the loan. (Pages 11 and 15);
    • But note that in the calculations portion (page 8) you are to exclude compensation in excess of $100,000 paid to independent contractors!  That would indicate that you are permitted to add up to $100,000 of compensation paid to independent contractors, yet (pages 11 and 15) it states that independent contractors are NOT to be included in your calculations!

So within these regulations there is a conflict.

PLEASE NOTE:   If you include independent contractors (those who receive 1099s and not a W-2), effectively claiming them as employees, you may be opening up exposure to potential claims by Federal and state government agencies, as well as those individuals, that those individuals should always have been classified as employees with potential issues regarding tax withholdings, FLSA exposure, etc.  Misclassification of independent contractors rather than as employees has significant consequences you need to discuss with an attorney.

  • The interest rate on the loans is now 1% (page 11).  So this program has gone from a 0% loan to a .5% loan and now a 1% loan!;
  • Repayment term of 2 years, not 10 years as promoted (page 12);
  • The forgiveness portion of the regulations (pages 13-14) is yet another retrenchment of what had been announced was available under the law.  And worse yet, the SBA announced that “additional guidance on loan forgiveness” will be forthcoming. (page 14); and
  • How the proceeds can be used (page 15)  – Please note more significant retrenchment regarding how the proceeds can be used and the effect upon the calculation of the amount that can be forgiven. (page 16 and 17).

Clearly there are major conflicts even within these regulations and corrections and clarifications should be forthcoming regarding the clearly rushed and conflicting regulations.  In light of the very specific language that independent contractor payments are not to be included and the overhanging issue of setting yourself up for a later claim by the federal and/or state governments for taxes and penalties due to misclassification, the best position would be to exclude them.  But you should consult your attorney regarding that final decision.

At this time, this should help you determine how to apply these regulations to your application and ultimately how your compliance with these regulations will effect loan forgiveness.

This alert is provided for information purposes only and does not constitute legal advice and is not intended to form an attorney client relationship.  Please contact Towne, Ryan & Partners, P.C. for additional information.