September 23, 2020

Volume X, Number 267

September 23, 2020

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September 22, 2020

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September 21, 2020

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Additional Treasury Guidance on SBA 7(a) Loan Program Under CARES Act

The U.S. Department of Treasury provided additional guidance on March 31, 2020 (the “Guidance”) on the Paycheck Protection Program (7(a) loans).

When You Can Apply For The Program

  • April 3 for small businesses and sole proprietorships.

  • April 10 for independent contractors and self-employed individual.

  • A sample application can be found here.

Employees Making More Than $100,000

The CARES Act was unclear on how to treat employees making over $100,000. The Guidance makes it clear that you can include employees making over $100,000 but they will be capped at $100,000.

How to Use Loan Proceeds

The Guidance updates what you can use loan proceeds on to:

  • Payroll costs including benefits;

  • Interest on mortgage obligations incurred prior to February 15, 2020;

  • Rent, under lease agreements in force prior to February 15, 2020; and

  • Utilities, for which service began prior to February 15, 2020.


The Guidance clarifies that for forgiveness, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.

Loan Terms

  • Interest rate: 0.5% fixed rate.

  • Maturity: 2 years.

Who Needs to Sign the Application?

  • For a sole proprietorship, the sole proprietor;

  • For a partnership, all general partners, and all limited partners owning 20% or more of the equity of the firm;

  • For a corporation, all owners of 20% or more of the corporation;

  • For limited liability companies, all members owning 20% or more of the company; and

  • Any Trustor (if the Applicant is owned by a trust).

The borrower fact sheet put out by the Treasury can be found here.

The lender fact sheet put out by the Treasury can be found here.

© Polsinelli PC, Polsinelli LLP in CaliforniaNational Law Review, Volume X, Number 92


About this Author

Phil Feigen of the Polsinelli Law Firm Corporate Transaction Attorney, in Washington DC
Office Managing Partner

Phil Feigen brings a unique perspective to providing general corporate advice, as well as complex business counsel to clients in ever-changing regulatory environments.  For more than 20 years, Phil has been providing guidance with respect to Small Business Investment Companies and other Small Business Administrative regulations, federal and state banking laws and federal securities laws. 

Phil focuses on helping clients through the SBIC licensing process so that they may realize the benefits of the program and increase the amount of investment...

Sara C. Ainsworth Securities & Corporate Finance Attorney Polsinelli Washington, D.C.

As an associate in the Securities & Corporate Finance practice, clients rely on Sara Ainsworth to work with Polsinelli’s team of attorneys to analyze each transaction matter to develop a strategic approach to representation based on the client’s immediate and long-term business and operational goals.

Working closely with seasoned Polsinelli attorneys in the Securities & Corporate Finance practice, Sara helps deliver a range of legal services during the life cycle of the client’s business—from selecting the appropriate choice of entity through to exit strategy.  Her practice focuses on:

  • Planning and executing capital-raising transactions
  • Drafting and negotiating key commercial agreements
  • Money service business and banking applications and registrations
  • Mergers and acquisitions and other strategic transactions
  • Fund formation, including regulated funds such as Small Business Investment Companies

Sara supports clients in a variety of industries, including the financial technology and mobility industries. Collaborating with attorneys from other related practices allows Sara and the entire attorney team to provide clients with comprehensive legal advice designed to minimize liability, maintain flexibility, and advance the client’s objectives.