SBA amends requirements for its Paycheck Protection Program


Source: CohnReznick

The much-anticipated launch of the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) today has been met with widespread confusion by many applicants, as well as by the SBA lenders participating in the program. 

On the eve of the program’s launch, the SBA issued updated guidance (its first since the passage of the Coronavirus Aid, Relief, and Economic Security, or CARES, Act) with the intention to clarify the rules, qualifications, loan criteria, and other details for PPP participation. While a number of still outstanding issues require resolution, the updated guidance does address several previously unanswered questions about the program. It also contains some significant modifications.

If your business may be applying for financial assistance under the CARES Act, here is what you need to know about the PPP and the clarifications/changes made by the SBA yesterday. 


The PPP provides $349 billion in lending capacity under the SBA’s Section 7(a) loan program. It was created to help small businesses (fewer than 500 employees) with funds to pay up to eight weeks of payroll costs, including benefits. The funds can also be used to pay mortgage interest, rent, and utilities. The maximum loan amount available to each qualifying business is the lesser amount of:

2.5 times the average monthly payroll costs (calculated according to a specified formula) during the calendar period of 2019 (for most)

$10 million



- The program employs “first come, first serve” prioritization.

- The per-employee salary limit to be used when calculating payroll costs is $100,000. Health insurance, benefits, and employer state taxes on payroll are included over and above this amount.

- The guidance defines the payroll period as the “last 12 months,” while the current application states “most applicants will use the average monthly payroll for 2019.” Lenders are being required to collect full 2019 calendar year payroll information to confirm payroll definition. 

- Independent contractors/sole proprietors are eligible for the PPP based on their self-employment net income.

- Independent contractors may not be counted toward payroll costs.

- Federally illegal businesses, such as cannabis, may not participate in the program.

- The SBA plans to issue additional guidance on the applicability of affiliation rules.


For any business in the process of applying for a PPP loan, it is critical to adhere to the new guidance. This is especially true for the collection of payroll information, which must now be for Jan 1., 2019, to Dec. 31, 2019 (calendar year 2019).

We fully expect the SBA to continue making some modifications to the program, and we will keep you informed of any further updates. 

CohnReznick has established an SBA Task Force to assist our clients with the application process and financial documentation for SBA loan assistance.

Visit our Coronavirus Resource Center for additional information on tax and legislative updates, as well as industry-specific strategies to help your business deal with disruption brought on by the coronavirus pandemic.