Coronavirus Aid, Relief, and Economic Security (CARES) Act

The Coronavirus Aid, Relief, and Economic Security (CARES) Act allocated $350 billion to help small businesses keep workers employed amid the pandemic and economic downturn. Known as the Paycheck Protection Program, the initiative provides 100% federally guaranteed loans to small businesses. We have compiled a FAQ regarding this program:

What is this program?

The Small Business Paycheck Protection Program is a new lending program that allows businesses to borrow enough to cover monthly payroll costs for up to 2.5 months. If used for payroll, mortgage interest or other qualified expenses, these loans will be forgiven as long as the employer continues to employ its workers or rehires them when they reopen for business.

Who can apply?

You are eligible if you are:

• A small business with fewer than 500 employees
• A small business that otherwise meets the SBA's size standard
• A 501(c)(3) with fewer than 500 employees
• An individual who operates as a sole proprietor
• An individual who operates as an independent contractor
• An individual who is self-employed who regularly carries on any trade or business
• A Tribal business concern that meets the SBA size standard
• A 501(c)(19) Veterans Organization that meets the SBA size standard

Where can I apply?

You can apply at any lending institution that is approved to participate in the program through the existing U.S. Small Business Administration (SBA) 7(a) lending program and additional lenders approved by the Department of Treasury. You can call your bank or find SBA-approved lenders in your area through SBA's online Lender Match tool .

What is the maximum amount I can borrow?

The amount any small business is eligible to borrow is 250 percent of their average monthly payroll expenses, up to a total of $10 million. This amount is intended to cover 8 weeks of payroll expenses and any additional amounts for making payments towards debt obligations. This 8-week period may be applied to any time frame between February 15, 2020 and June 30, 2020. Seasonal business expenses will be measured using a 12-week period beginning February 15, 2019, or March 1, 2019, whichever the seasonal employer chooses.

"Payroll costs" are defined very broadly and include:

• Salaries, wages, commissions, or similar compensation to an employee or independent contractor up to $100,000/year, $8,333.33/month
• Payment of cash tip or equivalent
• Payment for vacation, parental, family, medical or sick leave
• Severance payments for dismissal or separation
• Payment for group health care benefits, including insurance premiums
• Payment of any retirement plan contributions
• Payment of state and local taxes assessed on the compensation of employees

Payroll costs do NOT include:

• Compensation of an individual employee over $100,000/year, $8,333.33/month
• FICA and Federal tax withholdings
• Compensation for non-US residents
• Sick leave and family leave provided by the new Families First Coronavirus Response Act for which there are already tax credits

How much will be forgiven?

A borrower is eligible for loan forgiveness equal to the amount the borrower spent on the following items during the 8-week period beginning on the date of the origination of the loan:

• Payroll costs
• Interest on the mortgage obligation incurred in the ordinary course of business
• Rent on a leasing agreement
• Payments on utilities (electricity, gas, water, transportation, telephone, or internet)
• For borrowers with tipped employees, additional wages paid to those employees.

The loan forgiveness cannot exceed the principal.

Am I responsible for interest on the forgiven loan amount?

No, if the full principal of the PPP loan is forgiven, the borrower is not responsible for the interest accrued in the 8-week covered period. The remainder of the loan that is not forgiven will operate according to the loan terms agreed upon by you and the lender.

When is the application deadline for the Paycheck Protection Program?

Applicants are eligible to apply for the PPP loan until June 30th, 2020.

If I have applied for, or received an Economic Injury Disaster Loan (EIDL) related to COVID19 before the Paycheck Protection Program became available, will I be able to refinance into a PPP loan?

Yes. If you received an EIDL loan related to COVID-19 between January 31, 2020 and the date at which the PPP becomes available, you would be able to refinance the EIDL into the PPP for loan forgiveness purposes. However, you may not take out an EIDL and a PPP for the same purposes. Remaining portions of the EIDL, for purposes other than those laid out in loan forgiveness terms for a PPP loan, would remain a loan. If you took advantage of an emergency EIDL grant award of up to $10,000, that amount would be subtracted from the amount forgiven under PPP.

This is just a brief overview of one section of the CARES Act. We will continue to share additional details regarding other provisions that could be beneficial to you and your business on our Facebook page. Please call us if you have any questions or need assistance completing the loan application.