A Quick Overview of the CARES Act – Small Business Paycheck Protection Program

April 6, 2020–The Paycheck Protection Program (PPP), administered by the Small Business Administration (SBA), is a loan program designed to provide a direct incentive for small businesses to keep their workers on the payroll. Approved businesses may use the proceeds to cover ongoing “payroll costs” (as defined under the CARES Act) which includes employee payroll, healthcare costs, rent, utilities and other debt incurred by the business.

Businesses may qualify for the loan if they qualify as one of the following:

  • A small business with fewer than 500 employees;
  • A small business that otherwise meets the SBA’s size standard (i.e. businesses with not more than 500 employees at one location);
  • 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; or
  • A 501(c)(19) Veterans Organization that meets the SBA size standard.

The PPP loan application process includes i) submitting an SBA form; ii) making good faith certifications regarding the applicant/business; and iii) providing supporting documentation (as requested on a case-by-case basis by lenders).

PPP loans are capped at a maximum loan amount and are eligible for forgiveness up to the full amount of the loan and any accrued interest. PPP loans that have a remaining balance after application of forgiveness (if any), have a maturity of two (2) years from the date which the recipient applied for the loan forgiveness and bear an interest rate of one percent (1%). PPP loans do not require a personal guarantee or collateral from the applicant and lenders may not charge applicants an application fee.

SBA-certified lenders may begin processing loan applications as soon as April 3, 2020 and applications will be accepted through June 30, 2020.

Businesses can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program.

If you have questions about whether you and/or your business may be eligible for a Paycheck Protection Program loan, or any other SBA loan, please do not hesitate to contact our team.  Thank you and stay well!

About McDonald Carano

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