Paycheck Protection Program (PPP)
Note: Information is current as of April 13, 2020.
On March 27, 2020 the Coronavirus Aid, Relief and Economic Security Act (CARES Act) was signed into law. The CARES Act includes $2 trillion in economic stimulus money with $349 billion available as small business loans through the Paycheck Protection Program (PPP).
The PPP provides small businesses with a two-year loan for up to 2.5 months of payroll cost subject to a $10,000,000 maximum. Small business owners can apply for the loan by filling out the PPP application form and providing supporting documentation for payroll costs.
The guidance from the Treasury and Small Business Administration (SBA) defines payroll costs as:
- Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee);
- Employee benefits including costs for vacation, parental, family, medical, or sick leave;
- Allowance for separation or dismissal;
- Payments required for the provisions of group health care benefits including insurance premiums;
- Payment of any retirement benefit;
- State and local taxes assessed on compensation.
The PPP loan is permitted to be used for:
- Payroll costs, including benefits;
- Interest on mortgage obligations, incurred before February 15, 2020;
- Rent, under lease agreements in force before February 15, 2020;
- Utilities, for which service began before February 15, 2020.
The guidance issued by the Treasury states “The loan amounts will be forgiven as long as the loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8 week period after the loan is made, and employee and compensation levels are maintained.” The PPP loan guidance states the loan forgiveness is subject to reduction for decreases in number of staff or level of payroll for the 8 weeks following the receipt of the loan. The loan recipient has until June 30, 2020 to restore full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.
Additionally, the SBA has advised that no more than 25% of the loan forgiveness can be spent on non-payroll costs.
Loans can be processed by SBA lenders and will be made on a first-come, first-serve basis. The application period opened for small business and sole proprietors on April 3, 2020, and it opens for independent contractors and self-employed individuals on April 10, 2020.
The guidance provided by the Treasury and the SBA continue to evolve. Below are links to additional resources about PPP loans.
Paycheck Protection Program Loan Application
Paycheck Protection Program Information Sheet: Borrowers
SBA April 3, 2020 Guidance
SBA April 4, 2020 Guidance
Treasury and SBA Paycheck Protection Program FAQ
For additional questions or comments, please contact Christopher Foux at 703-888-0422 or Stephen Dowd at 412-338-6706