Paycheck Protection Loans

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by the House on Friday, March 27, 2020. There are several unanswered questions and we wanted to share what we currently know about the Paycheck Protection Program:

  • This is the largest, most generous aid package in U.S. history. It may seem too good to be true, but the intent of the U.S. government is to make up for the losses to small businesses and they seem to be committed to making that happen. In a nutshell, businesses will apply for a loan of 2.5 months of eligible expense coverage based on 2019 numbers.
  • There are approximately 30 million small businesses in the U.S. and demand will be great.  If you have a relationship banker, reach out early and use them as a resource. Be ready to apply quickly and correctly under the guidelines! We recommend calculating your anticipated loan amount as soon as possible.
  • Forgiveness will be based on employee retention from 2019 thru June 30, 2020. We understand there will be a window of time after loan disbursement to re-hire if there have been terminations in 2020 due to COVID-19. We do not know these details yet.

The CARES Act: SBA Loans Defined

  • Covered loan period February 15, 2020 through June 30, 2020.
  • Loan amount is the lesser of (a) $10 million or (b) 2.5 multiplied by the average total monthly payroll costs as defined in Section 11 of the CARES Act.
  • NOTE: $100,000 per employee salary cap on wages.
  • Allowable uses include payroll support (such as employee salaries, paid sick or medical leave, insurance premiums) and mortgage, rent and utility payments.

Eligible Businesses

  • Small businesses, including 501(c)(3) nonprofit, with fewer than 500 employees; except for applicants within the accommodation and food services sector that can have up to 500 employees per physical location.
  • Includes sole-proprietors, independent contractors, and other self-employed individuals as eligible for loans.
  • Business is operational on February 15, 2020 and had employees for whom it paid salaries and payroll taxes, or a paid independent contractor.


  • Waives both borrower and lender fees for participation in the Paycheck Protection Program.
  • Waives the credit elsewhere test for funds provided under this program.
  • Waives collateral and personal guarantee requirements.

Loan Forgiveness

  • Loan partially or fully FORGIVABLE if certain guidelines met.
  • Otherwise remaining loan balance will have a maturity of not more than 10 years, and the guarantee for that portion of the loan will remain intact.
  • Borrower shall be eligible for loan forgiveness equal to the amount spent during an 8-week period after the origination date of the loan:
  • On payroll costs (cap of $100,000 of wages), interest payment on any mortgage incurred prior to February 15, 2020.
  • On payment of rent on any lease in force prior to February 15, 2020.
  • On payment on any utility for which service began before February 15, 2020.
  • Amounts forgiven may not exceed principal amount.
  • Amount forgiven reduced proportionally by any reduction in employees retained compared to prior year.
  • Canceled indebtedness resulting from this section will NOT be included in the borrower’s taxable income.
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