Paycheck Protection Program

The latest coronavirus relief fund established new loans to help employers pay workers and cover other employment-related expenses during the coronavirus crisis.

Paycheck Protection ProgramUnder the Coronavirus Aid, Relief and Economic Security (CARES) Act, the U.S. Small Business Administration (SBA) will manage payroll-protection loans for qualifying organizations with fewer than 500 employees.

Payroll-protection loans can be applied to expenses incurred in an eight-week period between February 15, 2020 through June 30, 2020 and may be used for payroll costs, health care, rent, utilities, and other business debts. Most businesses are only eligible if they employ less than 500 employees. Independently owned franchises that are SBA-approved and employ less than 500 workers are also eligible and each store location could be eligible.

Under the program:

  • A covered business may qualify for a loan of 2.5 times its average monthly payroll costs, up to $10 million.
  • Loan payments will be deferred for six months.
  • The SBA will forgive loans under certain conditions.

Supporting ongoing operations

The loan must be utilized to support ongoing operations, and proceeds must be used to retain workers and maintain payroll. Employee salaries can be paid up to an annualized rate of $100,000. This excludes paid-sick and paid-family leave payments made pursuant to the Families First Coronavirus Response Act (reimbursement for those leave payments will be provided through tax credits).

If employers receive other SBA loans or have an application pending, they may not use those loans and the payroll-protection loan for the same purpose. There is an opportunity to fold into a new loan any emergency loans made between January 31, 2020 and the date the new payroll-protection loan becomes available. The CARES Act also offers an employee retention tax credit, which is not available to employers who receive a paycheck-protection loan.

Loan forgiveness

The Paycheck Protection Program (PPP) is meant to encourage businesses to keep their workers employed or quickly rehire them. The SBA will forgive loans if all employees remain on payroll for eight weeks and the money is used for covered expenses. The amount spent on payroll costs, rent, and utilities in the eight weeks following the loan origination will be forgiven, so long as the employer does not reduce its full-time staff or reduce wages by more than 25 percent within that eight weeks. The amount that is forgivable will be reduced if an employer’s full-time headcount declines or if employees’ wages are reduced. If the company still must still lay off employees after receiving the loan, the amount of loan forgiveness lost due to the layoff will be reapplied if the company is able to hire back the same number of employees by June 30, 2020.

Employers can use a paycheck-protection loan for other business-related expenses, such as inventory, but that portion will not be forgiven and will need to be repaid in accordance with the lender’s terms.

Application processing opens April 3

Lenders can start processing loan applications for small businesses and sole proprietors on April 3, 2020 and independent contractors and self-employed workers on April 10, 2020.

Loan applicants may apply until June 30, 2020. Businesses are encouraged to get started as soon as possible because there is a funding cap. Small businesses can apply through established SBA 7(a) lenders or other participating financial institutions, and additional regulated lenders will soon be approved to participate in the program.

Stay informed

We will keep you informed as additional information becomes available and are happy to assist with loan applications. You can find links to additional PPP resources and the loan application below. Please contact us if you have any questions, concerns, or need advisement during this unprecedented time. You can also check our Coronavirus Resources Page for more updates.

PPP Loan Application
Paycheck Protection Program FAQs
COVID-19 Small Business Resource Center

SBA publishes new PPP guidance for the self-employed and general partners

Photo by Sharon McCutcheon on Unsplash