Paycheck Protection Program Loan Overview

(Originally Emailed: April 8, 2020)
Dear Clients:

By now we are sure that each of you have received an endless number of emails about the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).

Our email blast sent out last week pointed each of you in the right direction toward websites to get accurate, updated information on the new legislation we are learning about together.

In our email we highlighted the Paycheck Protection Program Loan.  Directly below, you will find the Paycheck Protection Program Loan Overview for your reference.

Paycheck Protection Program Loan Overview 

Covered Loan Period
Retroactive to February 15, 2020 through June 30, 2020

Maximum loan amount
Equal to lesser of:

  • 2.5 times the average total monthly payroll costs (maximum $100,000 per employee) during the one year before the date on which the loan is made (between January 1, 2020, and February 29, 2020, for newer businesses); plus any refinanced
    Economic Injury Disaster Loans; or

  • $10 million

Payroll costs defined
“Payroll costs” means the sum of the following payments:

  • Salary, wages, or other compensation paid to an employee, sole proprietor, or independent contractor (up to $100,000 annual limit per worker);

  • Payment of cash tips or equivalents;

  • Vacation, parental, family, medical or sick leave (other than the paid leave benefits required under the FFRCA);

  • Termination allowances;

  • Group health care benefits, including insurance premiums;

  • Retirement benefit payments; and

  • State or local payroll taxes

Who's eligible
Businesses, including nonprofits, that:

  • Were in operation on February 15, 2020, and

  • Have fewer than 500 employees (exceptions for certain industries)

Includes sole proprietorships, self-employed individuals, and independent contractors (including gig workers)

Business only needs to self-certify that loan is necessary due to economic uncertainty caused by COVID-19

Loan Forgiveness
Loan amount equal to eight weeks of the business’s payroll, mortgage/rent, and utilities, up to loan principal amount. Reduced if employees were laid off over last year or salaries are reduced from prior quarter

Up to 60 days to process loan forgiveness application. COD exclusion for federal income tax purposes

Use of Loans
Loans can be used to pay:

  • Payroll costs;

  • Group health care benefits;

  • Retirement benefits;

  • Mortgage/rent;

  • Utilities; and

  • Interest on pre-February 15, 2020, incurred debts

Payment Deferral
Payments on principal deferred for six (6) months

How to Apply
Most banks will be accepting applications.  Check with bank regarding processing times.

Loan Conditions

  • Two-year maturity date;

  • No personal guarantees or collateral (although owner(s) liable for amounts used for non-qualified purposes);

  • 1.0% interest rate;

  • Borrower and lender fees waived;

  • No prepayment penalties; and

  • One loan per business