Payroll Protection Program Loans Under the C.A.R.E.S. Act

Payroll Protection Program Loans Under the C.A.R.E.S. Act

As everyone knows by now, the federal government has pledged over $2 trillion in stimulus packages to shore up our economy primarily through the Coronavirus Aid, Relief, and Economic Security (C.A.R.E.S.) Act.  As multiple government agencies develop plans to get this stimulus in the hands of the people who need it, it is important to consider what is available to you and what may also be available to your tenants, customers, and vendors.

One of the most significant stimulus initiatives is the Paycheck Protection Program Loans. These loans:

    • are available under Section 7 of the Small Business Act to business with less than 500 employees (including sole proprietorships and nonprofits)
    • are available until June 30, 2020
    • are fully guaranteed by the federal government through December 31, 2020
    • have a maximum of $10 million
    • based on the sum of the average of the monthly “payroll costs” of the business for the one year period ending on the date the loan was made (with an alternative calculation available for seasonal employers), multiplied by 2.5, plus any EID Loan (defined below) taken out after January 31, 2020 that has been refinanced into a paycheck protection loan.
    • have a maximum maturity of 2 years and have an interest rate not to exceed .5%
    • may be used to cover payroll, mortgage payments, rent, utilities, and any other debt service requirements
    • do not have to be personally guaranteed
    • do not have the standard fees under Section 7 (they are waived)
    • may have payments deferred for a period of at least 6 months but not more than a year
    • may be forgiven, in part, on a tax-free basis in an amount equal to the payments made by the borrower in the eight weeks following the date of the loan for payroll costs, mortgage interest or rent, or for certain utility payments provided that the borrower
          • does not reduce its workforce during the eight-week period as compared ti the other periods in 2019 or 2020; OR
          • does not reduce the salary or wages paid any employee who had earned less than $100,000 in annualized salary by more than 25% during the covered period


The C.A.R.E.S. Act also extends access to existing Economic Injury Disaster Loans (EID Loans) available under Section 7(b)(2) of the Small Business Act to include not just businesses with less than 500 employees, but also sole proprietors and employee stock option plans, without any personal guarantee on loans below $200,000 made before December 31, 2020.  The Act also creates an Emergency Grant to allow a business that applied for one of these EID Loans to obtain an immediate $10,000 advance for payroll which is not required to be repaid even if the loan request is denied.  The Act also provides for the forgiveness of up to six months or principal, interest and fees on existing qualifying SBA Section 7(a) loans (other than Paycheck Protection Loans).  For SBA Express Loans the statutory cap is raised from $350,000 to $1 million through December 31, 2020 (SBA Express loans are a fast track loan that is typically addressed in 36 hours as opposed to Section 7(a) loans that may take weeks to approve and fund).

You can find more information in the US Treasury Fact Sheet.  Please feel free to email Brad Rapp or Kieran Wheeler in our office for more information.


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