CARES Act: SBA Paycheck Protection Program

Home > Covid-19 Resources for Small Businesses > Paycheck Protection Program

~ ~ ~ ~ ~ ~ ~ ~ ~ ~
CARES Act: Paycheck Protection Program Application
~ ~ ~ ~ ~ ~ ~ ~ ~ ~

The Coronavirus Aid, Relief, and Economic Security (CARES) Act authorizes a new Small Business Administration (SBA) loan program now known as the “Paycheck Protection Program” (PPP). The Paycheck Protection Program provides small businesses with zero-fee loans of up to $10 million to cover payroll and other operating expenses.  Of that loan, up to 8 weeks of payroll, rent, and utility expenses can be forgiven based on certain criteria.  Payments on principal and interest, on the parts of the loan that are not forgiven, are deferred for six months and up to one year.  Small businesses will be able to apply if they were harmed by COVID-19 between February 15, 2020 and June 30, 2020.  Loans are available through June 30, 2020 and you can email the SBA to find a lender at [email protected]

Your business is eligible if your business, entity, franchise or sole proprietorship employs less than 500 employees and was in operation on February 15, 2020. As banks get ready to accept your application, you will need documentation. We recommend you begin to gather:

You may use the funds to cover (i) payroll costs, (ii) group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums, (iii) employee salaries, (iv) mortgage interest payments, (v) Rent, (vi) Utilities, (vii) interest on any other debt obligations incurred prior to February 15, 2020. (Loan may not be used for payroll costs for employees who receive annual compensation over $100,000).


  • Your maximum loan size is 2.5x your average monthly payroll costs from February 15, 2019, to June 30, 2019.  If you are a seasonal employer, you can opt to choose March 1, 2019, as the time period start date. And, if you were not in business this time last year, your maximum loan is equal to 250% of your average monthly payroll costs between January 1, 2020, and February 29, 2020.
  • By way of example, if annual payroll is $1.2 million, you can request a loan up to $250,000 (1,200,000/12=$100,000; $100,000 x 2.5 = $250,000).
  • The loan maximum in all cases is $10 million.
  • There are no loan fees or borrower fees and typical collateral and personal guarantees are waived.

For calculating your loan size, the bank will consider these payroll costs:

  • Compensation (salary, wage, commission, or similar compensation, payment of cash tip)
  • Payment for vacation, parental, family, medical, or sick leave
  • Allowance for dismissal or separation
  • Payment required for group health care benefits, including insurance premiums
  • Payment of any retirement benefit
  • Payment of State or local tax assessed on the compensation of employees;
  • and bank will exclude the following costs: compensation over $100,000, certain withheld taxes, compensation for employees outside of the United States, and required leave under the Families First Coronavirus Response Act, for which a credit is allowed.

You can apply to your lender to forgive your loan for the amount of payroll costs, plus payments of interest, rent, and utilities, incurred during the 8-week period after the loan is disbursed. The amount that can be forgiven is proportionate to maintaining employees and wages for a period of time. Speak to your lender about this provision. Also, speak to your tax advisor to confirm that the forgiven portion of the loan will not be included in your taxable income. To apply for this loan forgiveness, you will need to provide the following documentation:

  • Documentation verifying the number of employees on payroll, their pay rate, IRS payroll and state income tax filings, and unemployment insurance filings;
  • Documentation verifying payments of rent, mortgage interest, utilities, and other debt; and
  • Certification from your business that the documentation provided is true and that amount of the loan that is being forgiven was used in line with the program’s requirements.

For any amounts of the loan not forgiven, the maximum term will be 10 years; the maximum interest rate charged will be 4 percent; there will be zero loan fees and zero prepayment fee. Principal and interest will be deferred for a total of 6 months to a year after disbursement of the loan.
You may apply for a Paycheck Protection Program (PPP) Loan AND for other SBA loans, including the SBA economic injury disaster loans, 7(a) loans, 503 loans, and microloans. However, you may not use funds from each of these programs for the same purposes.

Needleman Management presents this information as a service to our tenants, clients, vendors and contractors as an informational resource only. We do not claim to be lawyers, accountants or tax professionals. We present this material for informational purposes only and is based solely as our best understanding at this time. We accept no liability for any action based on this information nor for any errors or omissions. We strongly suggest that you discuss the material provided herein with your legal and tax professionals.

The full 880-page CARES Act document can be found here.
READ NEXT: CARES Act: Economic Injury Disaster Loans (“EIDL”) and Grants

Last Updated: April 11, 2020