Posted by: Mar 30, 2020

The Paycheck Protection Program

Part 3: The Paycheck Protection Program

Read Part 1 here.

Read Part 2 here.

The CARES Act was signed into law at the end of last week.  In Part 2 of my series of articles on this unprecedented legislation, we looked at the portions of the bill designed to help out small businesses. 

Today, I’d like to provide more details on the Paycheck Protection Program, including how to determine if you are eligible for the program, how much you can borrow, and under what terms the loan can be forgiven.

Who is eligible? 

Any small business with fewer than 500 employees (or that would otherwise meet the Small Business Administration’s size standard), a 501(c)(3) with fewer than 500 employees, sole proprietors, independent contractors, and the self-employed are all eligible to obtain a loan.

What will lenders be looking for? 

Your business must have been in operation prior to February 15, 2020.  You’ll need to show that the “uncertainty of the current economic conditions” make a loan necessary for you to maintain ongoing operations.  You must intend to use the money to cover payroll expenses, rent, mortgage expenses or utility expenses.  You also cannot have already received a loan to cover the same expenses or have an application pending to cover the same expenses.

How much can you borrow?

You can borrow up to 2.5 x your average monthly payroll costs, not to exceed $10 million.  Payroll costs include salary, wage, commission or similar payments (up to $100,000 per year per employee), cash tips, leave payments, allowance for dismissal or separation, group health care benefits (including insurance premiums), retirement benefits, and state or local taxes assessed on employee compensation.  Payroll taxes, foreign workers and sick leave wages which can receive a credit under the Families First Coronavirus Response Act are all excluded.

Will the loan be forgiven?

From the date the loan is obtained (the origination date) during the 8 week period that immediately follows, any payroll costs, interest on mortgage payments, rent, utilities payments and tipped wages payments can be forgiven.  However, the total loan amount forgiven could be reduced based on any reduction in the number of employees you retain, or a reduction in the salary actually paid to employees.  But if you bring back employees or reinstate full wages by June 30, 2020, the loan forgiveness amount will not be impacted.

A handy guide published by the U.S. Chamber of Commerce, which include the above information and additional information regarding sole proprietors, independent contractors, and the self-employed can be found here.

Additionally, “The Small Business Owner’s Guide to the CARES Act” published by the Senate Committee on Small Business & Entrepreneurship can be found here.  As always, please do not hesitate to give us a call at 832-225-3448 or email us at if you need more information, clarification, or just need to talk through your options.