The CARES Act Revisited

The CARES Act Revisited: Updates to the Paycheck Protection Provision

A lot has happened in the past week.  And now that we’ve had an opportunity to read through more details of the Paycheck Protection Provision, it’s become clear that the program’s rollout will be messy.  In fact, it already is.

Last week I wrote a post outlining a few of the provisions in the CARES Act meant to provide economic relief to small businesses.  What we’ve come to realize in the last few days is that the Treasury Department has a great deal of latitude in how these programs will actually be offered.

For example, the permits the Treasury Department to issue up to $349 billion of loans to small businesses through the Paycheck Protection Program.  Businesses with fewer than 500 employees can apply through an SBA approved lender for loans up to either 2.5x their average monthly payroll over the previous year, or $10 million (whichever is less).  The bill stipulates that the pay back period for the loans may be stretched out to up to 10 years, with an interest rate no higher than 4%.

Then, early last week, the Treasury Department stepped in and communicated that all loans will have a two year amortization period and 0.5% interest rate.  And on Thursday, Secretary Mnuchin announced another interest rate revision to 1%.

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