The Paycheck Protection Program (PPP) is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This is a nearly $350‐billion program intended to provide American small businesses with eight weeks of cash‐flow assistance through 100 percent federally guaranteed loans. These loans will be administered by the Small Business Administration (SBA) through the 7(a) loan program.

Importantly, please note that PPP loans are distinct from the SBA economic injury disaster loan (EIDL) program that is already available to small businesses, nor may such loans be used for the same purpose. Interested borrowers should evaluate both programs and choose the path that most closely addresses their needs.

Attached is a summary of the provisions relating to Paycheck Protection Program (PPP) loans under the CARES Act, as well as an opportunity to seek emergency EIDL grant advances under Section 7(b). Although the bill has now been signed by the President, the expectation is that the U.S. Department of Treasury, the U.S. Small Business Administration, and qualified lenders will be providing guidance on this program in the upcoming weeks.

WHO IS OFFERING THE PROGRAM AND HOW TO APPLY Currently‐authorized SBA lenders are qualified to offer PPP Loans. The CARES Act further expands the SBA’s authority to approve a broader‐range of financial services providers to issue PPP loans, including banks that offer FDIC insurance, however it is not a requirement that these bank participate in the program.

Currently there is no process available to apply for the PPP loan. Regulations are in the process of being prepared that will implement the program, but this does not exist to date. We recommend that you contact your preferred lender to confirm they are part of this program.

WHO QUALIFIES FOR THE LOAN PROGRAM Companies with less than 500 employees or meet the SBA size standard for their specific industry‐

  • For‐profit companies (including sole proprietorships, independent contractors, self‐employed individuals)
  • 501(c)(3) nonprofits, and
  • 501(c)(19) veteran’s organization

Borrowers are required to certify the following:

  • The loan is necessary due to the uncertainty of the current economic conditions caused by COVID
  • You must acknowledge that the funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments.

Funds you use for other purposes will not be eligible for forgiveness.
No personal or business collateral is required.

LOAN AMOUNT DETERMINATION Eligible companies are permitted to seek loans for an amount equal to the lesser of:

  • 2.5 times the companies average monthly payroll costs measured over the prior twelve months1
  • $10,000,000
ALLOWABLE USAGE OF FUNDS Proceeds from the loan may be used for:

  • Employee salaries, Payroll costs, and commission payments
  • Group health care benefits/insurance premiums
  • Mortgage, rent, and lease payments (other than prepayment)
  • Utilities
  • Interest on any other debt obligations that were incurred before February 15, 2020.
ELIGIBILITY OF FORGIVENESS Company’s can apply for loan forgiveness equal to the payments made during the  8‐week  period  immediately  following  the  loan  origination  date  on the following2:

  • Payroll costs (excluding compensation over $100,000);
  • Interest on mortgages; and
  • Payments of utilities and rent.

Per SBA, at least 75% of the forgiven amount must have been used for payroll.

The amount eligible to be forgiven would be reduced in the event of employee layoffs or pay cuts. Specifically, the forgiveness amount would be reduced by:

The product of

(i)                  the eligible payroll costs and;

(ii)                 a percentage equal to (a) the average number of employees per month during the covered period divided by one of the following at the election of the borrower:

(1)    the average number of fulltime equivalent employees3 per month employed from February 15, 2019 to June 30, 2019; or

(2)    the average number of full‐time equivalent employees per month employed from January 1, 2020 until February 29, 2020 (unless the borrower is a seasonal employer, in which case the average number described in (1) will be used); and

(3) The aggregate amount of reduction in total salary or wages for any employee during the covered period that is in excess of 25% of the employee’s salary or wages during the most recent full quarter of employment before the covered period; provided, however, reductions in pay for employees who have an annualized salary of more than

$100,000 are not considered in this calculation4.

Note that forgiven loan amounts will not be treated as taxable income.

REQUIRED DOCUMENTATION PROVIDED TO LENDER To seek forgiveness, documentation will be provided to the lender that includes the qualified expenses during the 8‐week period subsequent to loan closing.

When submitting your application for loan forgiveness, you must provide the following documentation:

(1)    Documentation verifying the number of full‐time equivalent employees on payroll and pay rates for the periods described above, including:

  • Payroll tax filings reported to the IRS
  • State income, payroll, and unemployment insurance filings

(2)    Documentation to prove your mortgage, lease, or utility payments

  • Cancelled checks
  • Payment receipts
  • Account statements

(3)    A certification from a representative of the eligible recipient authorized to make such certifications that:

  • The documentation presented is true and correct; and
  • The amount for which forgiveness is requested was used to retain employees, make interest payments on a covered mortgage obligation, make payments on a covered rent obligation, or make covered utility payments; and

(4)    Any other documentation the Administrator determines necessary.

The lender must make a decision within 60 days of your forgiveness application submission.

LOAN COST, MATURITY, AND COLLATERAL Lenders will not require application fees, closing costs, collateral or personal guarantees. The maximum interest rate will be 4%, and a minimum first six months’ payments (principal and interest) will be automatically deferred. Finally, the lenders are not expected to perform credit analysis, because the loans will be 100% guaranteed by the SBA.

Any loan amounts not forgiven at the end of one year will be carried forward as an ongoing loan with terms of a maximum of 10 years at 4% interest or less.

1 Payroll costs include‐ Wages, health insurance, PTO, retirement benefits, state or local payroll taxes assessed on compensation of employees, and certain types of compensation to sole proprietors or independent contractors up to $100,000. Employee compensation in excess of $100,000 annually, compensation of foreign employees, FICA and income tax withholdings, and COVID‐ 19 paid leave are explicitly excluded from the calculation.
2 Obligations had to be in place before February 15, 2020.
3FTE’s determined by calculating the average number of full‐time equivalent employees for each pay period falling within a month.
4if you rehire employees that were previously laid off at the beginning of the period, or restore any decreases in wage or salary that were made at the beginning of the period, you will not be penalized for having a reduction in employees or wages, as long as you do this by June 30, 2020.


GENERAL INFORMATION An applicant who self‐certifies eligibility may request an Emergency Grant advance of up to $10,000 that must be distributed within three   days.
USES OF FUNDS The advance may be used for any allowable purpose for a Section 7(b)(2) loan, including to provide paid sick leave to employees unable to work due to COVID‐19, maintain payroll during business disruptions or substantial shutdowns, meet increased costs to obtain materials due to  interrupted  supply chains, make rent or mortgage payments or repay obligations that cannot be met due to revenue  losses.
REPAYMENT OF FUNDS The applicant will not be required to repay the advance even if denied a  loan. However, if the applicant is approved for a Section 7(a) loan, the  advance amount will be reduced from the loan forgiveness amount for payroll costs.