CARES Act – Payroll Protection Loans

CARES Act – Payroll Protection Loans

As you may know, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which includes payroll protection loans to small businesses, was enacted on March 27, 2020. Regulations providing additional guidance regarding the application process are expected within 15 days. In the meantime, here is a snapshot of the payroll protection loans:
Which businesses are eligible?
  • Businesses, including the self-employed, independent contractors and sole proprietors, with less than 500 employees that were in operation on February 15, 2020.
  • Your business must make a good faith certification that the loan is necessary because of economic uncertainty caused by COVID-19 and that loan will be used to maintain payroll.
  • Your business must also certify that it is not receiving assistance and duplicative funds for the same uses from another SBA program.
  • No collateral or personal guarantee are required.
How will loans be processed?
  • Through a SBA approved lender. Find a lender by clicking here.
How much can a business borrow?
  • Lesser of $10 million or 2.5 times your monthly payroll costs in the year prior to the loan date
How can the loan be forgiven?
  • Make an application for loan forgiveness through your SBA approved lender certifying and documenting compliance. Your lender determines loan forgiveness and seeks reimbursement from the SBA.
  • Loan forgiveness is available in amounts up to the principal amount of the loan, if spent on the following qualifying costs after an 8-week period beginning on the date of the origination of the loan:
  • Payroll costs (excluding costs for any compensation above $100,000)
  • Interest on the mortgage obligation incurred in the ordinary course of business
  • Rent on a leasing agreement
  • Payments on utilities
  • The loan forgiveness amount is reduced if the recipient either:
  • Reduces the average number of full-time equivalent employees per month during the covered period below the lesser of (a) the average number of full-time equivalent employees per month from February 15, 2019 to June 20, 2019 or (b) the average number of full-time equivalent employees per month from January 1, 2020 to February 29, 2020, or
  • Reduces the salary or wages of any employee in excess of 25 percent of the total salary or wages of the employee during the most recent full quarter during which the employee was employed before the covered period.
  • There is no reduction if a borrower re-hires the employees who earlier were terminated.
A fact sheet from the US Chamber of Commerce can be found here.
This program offers a huge potential for relief to small businesses.  We recommend that you contact your lender or an approved SBA lender for more information.
Our team at Rynn & Janowsky, LLP is here to help you navigate your obligations and resources related to COVID-19.