The Interim Final Rule (the “Rule”) pertaining to applications for the Paycheck Protection Program was released this evening. A few unexpected positions have been taken (and some ambiguity/uncertainty still remains) –

• Independent contractors may not be included in the calculation of the loan amount for a business concern with employees. Independent contractors are directed to file their own application for funding under the program.

  • In addition, the interest rate – capped at 4% in the CARES Act, but previously announced to be 0.5% -- has been increased to 1%.

Guidance for how to compute the loan amount was also provided, which has been extracted and provided below:

How do I calculate the maximum amount I can borrow?

The following methodology, which is one of the methodologies contained in the Act, will be most useful for many applicants.

i. Step 1: Aggregate payroll costs costs (defined below*) from the last twelve months for employees whose principal place of residence is the United States.
ii. Step 2: Subtract any compensation paid to an employee in excess of an annual salary of $100,000 and/or any amounts paid to an independent contractor or sole proprietor in excess of $100,000 per year.
iii. Step 3: Calculate average monthly payroll costs (divide the amount from Step 2 by 12).
iv. Step 4: Multiply the average monthly payroll costs from Step 3 by 2.5.
v. Step 5: Add the outstanding amount of an Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020, less the amount of any “advance” under an EIDL COVID-19 loan (because it does not have to be repaid).
13 CFR Part 120 [Docket No. SBA-2020-0015].

In order to apply, you must submit a completed Paycheck Protection Program Application Form, along with payroll documentation substantiating your loan amount request. Please be reminded that at least 75% of the loan proceeds must be used for payroll costs.

      *(f) Payroll costs means compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement; payment of state and local taxes assessed on compensation of employees; and for an independent contractor or sole proprietor, wage, commissions, income, or net earnings from self-employment or similar compensation.