The CARES Act includes a ‘Paycheck Protection Program’ for Small Businesses

Congress passed “The Coronavirus Aid, Relief, and Economic Security Act” (CARES Act), which included the “Paycheck Protection Program” (PPP) for small businesses. The PPP provides short-term cash flow assistance to small businesses to help these businesses and their employees deal with the immediate economic impact of the COVID-19 pandemic. Loans are made by lenders certified by the Small Business Administration (SBA) and guaranteed by the federal government. The SBA will administer the PPP. RRBB is available to guide you through the various relief programs being made available at the Federal and state levels.

Below is a summary description of key elements of the PPP:

Appropriated Amounts for the Program	$349 billion
Waivers	• Borrower and lender fees are waived • Prepayment fees are waived
Borrower Requirements	• Good faith certification that the loan is necessary because of economic uncertainty caused by COVID-19 and will be applied to maintain payroll and make required payments • Borrower must also certify that they are not receiving assistance and duplicative funds for the same uses from another SBA program • No collateral or personal guarantee are required
Payment Deferral	• Not less than 6 months and not more than 1 year (including payment of principal, interest, and fees) • To be determined by the originating lender
Permitted Uses	• Payroll costs • Health care benefits (including paid sick or medical leave, and insurance premiums) • Mortgage interest obligations (principal is not eligible) • Rent obligations • Utility payments • Interest on other debt obligations incurred prior to February 15, 2020
Terms of Loan Forgiveness (Sec. 1106)	Loan recipients will be eligible for loan forgiveness for an 8-week period after the loan’s origination date in the amount equal to the sum of the following costs incurred during that period: • Payroll costs (compensation above $100,000 excluded) • Payment of interest on mortgage obligation • Rent obligations • Utility payments• The amount forgiven cannot exceed the amount borrowed. Loan forgiveness will be proportionally reduced if the average number of employees is reduced during the covered period as compared to the same period in 2019. The amount of loan forgiveness will be reduced by the amount of any reduction in total employee salary or wages during the covered period that is in excess of 25 percent of the total salary or wages. • Payroll documentation and documentation of expenses are required to receive forgiveness, to ensure the forgiveness was used to retain employees and pay expenses • Borrowers that rehire laid off workers by June 30 won’t be penalized for having a smaller workforce at the beginning of the period • Borrowers with tipped workers may receive loan forgiveness for the additional wages paid to those employees • Lenders have 60 days to issue a decision on the application • The canceled loan amount will not count towards gross income for tax purposes
Eligible Businesses	Small businesses, nonprofits, Tribal business concerns, and veteran’s organizations that: • Have less than 500 employees or the applicable size standard for the industry as provided by SBA, or • Are sole proprietors, self-employed individuals, or independent contractors • Were in business on February 15, 2020
Federal Guarantee	Increases the government guarantee of 7(a) loans to 100 percent through December 31, 2020
Nonbinding Guidance	Lenders should prioritize small business, entities in underserved and rural markets, veterans and members of the military community, small business concerns owned by socially and economically disadvantaged individuals, women, and businesses in operation for less than 2 years
Maturity Schedule	Maximum 10-year maturity after application for loan forgiveness
Interest Rate	Not to exceed 4 percent during the covered period
Covered Loan Period	Retroactive to February 15, 2020 through June 30, 2020
Eligible Lenders	SBA and the Department of the Treasury are granted authority to determine additional lenders to administer the Payment Protection Program loans
Maximum Loan Amount	The lesser of: • 2.5x average monthly payroll costs during the 1-year period* before the date on which the loan is made, or • $10 million • *For new businesses, the measurement period would be January 1 to February 29, 2020The legislation also temporarily increases the maximum amount for an SBA Express loan from $350,000 to $1 million through December 31, 2020

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