What startups should know about PPP/CARES (March 31)

Executive summary: Treasury released a sample application for the PPP. There’s still a lot that’s unknown and honestly not that much you can do about it right now. We’ll follow up when we know more. (Not sure what the PPP is? See here.)

More detail: 

The Treasury Department has released a sample application for Paycheck Protection Program (PPP) loans earlier today. Here’s what we learned today:

• PPP loan applications officially open on Friday April 3. 
• We’re not aware of any lenders that have outlined their application process yet, though, which prevents you from assembling a complete application. You apply to a lender, e.g. a bank, not to the government directly. Typical advice is to get in touch with your bank now to see if they will be providing these loans. All of the banks that we’ve reached out to have said that they intend to participate, but don’t yet have any information to share.
• It’s indicated that lenders will ask for payroll documentation along with your application. It’s not clear exactly what report/statement they will expect, and it may vary from lender to lender.
• As we mentioned earlier, the eligible loan amount is 2.5x your average monthly payroll—with a cap of $100k annualized per employee, so there’s some subtlety in doing the calculation. The exact definition of “average monthly payroll” in the statute appears to be different than in the Treasury application, and we’re asking lawyers and lenders for clarification.
• There’s still uncertainty around VC ownership and qualification. If anyone who owns more than 20% in your company also owns stakes in other companies, you’re required to list these other companies on your application as “affiliates.” It’s not clear yet how this impacts your application.  Some people believe based on prior SBA guidance that certain VC protective provisions might also be relevant, but this is not yet clear. Speaker Pelosi and others are seeking clarification from the executive branch on this.
• If you’re really curious, some info for borrowers and lenders is available on this Treasury site.

We’ll continue to keep you (and our page about PPP) updated.

P.S. - If other founders want to get our notifications about this, they can join our mailing list here.

P.P.S. - We’ll be hosting a webinar with the latest info on April 8. You can register for Making Sense of the CARES Act and PPP here.