On Friday, March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law in response to the disturbing developments of Coronavirus (COVID-19) in the United States. Coronavirus Aid, Relief, and Economic Security Act, H.R. 748, 116th Cong. (2020).
The CARES Act provides an amendment to the Small Business Act, 15 U.S.C. 636(a), known as the Paycheck Protection Program, which authorizes the United States Small Business Administration (SBA) to provide up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. The Paycheck Protection Program can provide loans up to $10,000,000 for small businesses, nonprofit organizations, veterans’ organizations, tribal businesses, sole proprietors, and independent contractors with less than 500 employees, as well as eligible self-employed individuals. Employers with more than 500 employees may still qualify for the Paycheck Protection Program if their business meets the SBA size standards.
The Paycheck Protection Program provides loans for payroll and other business-related costs incurred from February 15, 2020 through June 30, 2020, including:
- Employee compensation such as salary, wage, commission, and cash tips;
- Payment for vacation, parental, family, medial, 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;
- Payments of interest of any mortgage obligation, not including any payment of principal;
- Rent, including rent under a lease agreement;
- Utilities;
- Up to $100,000 for compensation or income of a sole proprietor or independent contractor;
- Up to $100,000 for wage, commission, income, and net earnings from self-employment;
- Interest on debt obligations that were incurred before the covered period.
Loans may be provided for up to two months of your average monthly payroll costs from the last year plus an additional 25% of that amount. Payroll costs will be capped at $100,000 annualized for each employee. Loans under the Program have a maturity of two years and an interest rate of 0.5%.
Total loan forgiveness is only provided for costs associated with payroll costs, mortgage interest, rent, and utilities payment over the eight weeks after receiving the loan. It is anticipated that only 25% of non-payroll costs will be entitled to forgiveness. Therefore, it is imperative that applicants maintain staff and payroll documentation. In order to receive loan forgiveness, an applicant must submit a request to the lender servicing the loan.
Small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders on April 3, 2020. Independent contractors and self-employed individuals can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders on April 10, 2020. Employers interested in receiving a loan under this program must submit a Paycheck Protection Program Loan Application, listed below, and required documentation by June 30, 2020. Employers, sole proprietors, and independent contractors interested in taking advantage of this program should do so promptly, to avoid delay or under funding.
Applicants can apply through any existing SBA lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating in the Paycheck Protection Program. Click here for a list of SBA lenders. Other regulated lenders will be available to make loans under the Program following their approval and enrollment.
Below is the Paycheck Protection Program Loan application and corresponding Information Materials:
Paycheck Protection Program Loan Application released by the Treasury Department can be found here.
Payment Protection Program (PPP) Information Sheet for Borrowers can be found here.
Our attorneys are ready to assist you in handling all business needs during this unprecedented time of rehabilitation. During prior emergencies, Laddey, Clark & Ryan’s attorneys have assisted our business clients in applying for and securing financial assistance through the United States Small Business Administration. Please feel free to review the provided Payment Protection Program Loan Application and Payment Protection Program Information Sheet. If you have any questions or concerns please reach out to the Business Law Practice Group at Laddey, Clark & Ryan, LLP:
- Angelo J. Bolcato, Esq. (abolcato@lcrlaw.com)
- Jonathan N. Frodella, Esq. (jfrodella@lcrlaw.com)
- Thomas N. Ryan, Esq. (tryan@lcrlaw.com)
- Richard T. Sweeney, Esq. (rsweeney@lcrlaw.com)
Our attorneys can also be reached at: 973-729-1880
