Posted 3 years ago - by

CARES Act Loans Now Available for Small Businesses

The Coronavirus Aid, Relief, and Economic Security (CARES) Act signed into law on Friday, March 27, includes almost $350 billion for a federal small business loan program. The Paycheck Protection Program (PPP) is implemented by the Small Business Administration, with support from the Department of the Treasury, to provide timely financial aid to small businesses impacted by COVID-19. The goal is to incentivize business owners to retain employees by offering them loan forgiveness.


Loans are available to the following entities:

  • Small businesses with 500 employees or fewer
  • Businesses in an industry with an employee-based size standard through SBA higher than 500 employees
  • A restaurant, hotel, or a business that falls within the North American Industry Classification System (NAICS) code 72, “Accommodation and Food Services,” if each one has 500 employees or fewer

Also eligible for the loan are the following:

  • Tribal businesses
  • 501(c)(19) veteran organizations
  • 501(c)(3) nonprofits, including religious organizations
  • SBA-approved independently owned franchises with under 500 employees
  • Sole proprietors, independent contractors, gig economy workers, and self-employed individuals

Nonprofit organizations are subject to SBA’s affiliation standards. Eligible franchises can be found through SBA’s Franchise Directory.

Where and how to apply for a loan

There’s no need to visit any government institution to apply for the program. Small business owners can apply for Paycheck Protection Program at the following places:

  • Any lending institution approved to participate in the program through the existing U.S. Small Business Administration (SBA) 7(a) lending program.
  • Lenders approved by the Department of Treasury.

(This can be the bank the applicant is already using, or a nearby bank. There are thousands of banks already participating in the SBA’s lending programs, including numerous community banks.)

Where to get help/suggestions:

  • SBA’s online Lender Match tool
  • Local Small Business Development Center or Women’s Business Center for free assistance and guidance
  • (for a list of participating lenders as well as additional information and full terms)
  • Click here to download the loan application

Maximum amount for each borrower

Any small business is eligible to borrow 250 percent of their average monthly payroll expenses, up to a total of $10 million. This amount is intended to cover 8 weeks of payroll expenses and any additional amounts for making payments toward debt obligations.

This 8-week period may apply to any time frame between February 15 and June 30, 2020.

Seasonal business expenses will be measured using a 12-week period starting February 15, 2019, or March 1, 2019, whichever the seasonal employer chooses.

Deadline for applications

Applicants are eligible to apply until June 30, 2020.

Starting dates for applications are as follows:

April 3, 2020 – small businesses and sole proprietorships
April 10, 2020 – independent contractors and self-employed individuals

Loan applicants are encouraged to apply ASAP because there is a funding cap.

Details of the loan forgiveness

How to use the money for the loan to be forgiven

The amount of principal that may be forgiven is equal to the sum of expenses for payroll, and existing interest payments on mortgages, rent payments, leases, and utility service agreements.

Payroll costs include:

  • Employee salaries (up to an annual rate of pay of $100,000)
  • Hourly wages and cash tips
  • Paid sick or medical leave
  • Group health insurance premiums

For its customers, Payroll Systems has developed a custom report to provide you the necessary payroll calculations to apply for a PPP loan.

The PPP can be used for other business-related expenses, like inventory, but that portion of the loan will not be forgiven.

When the loan will be forgiven

The loan is forgiven at the end of the 8-week period after taking out the loan.

Borrowers will work with lenders to verify covered expenses and the proper amount of forgiveness.

The covered period of the loan

The covered period extends from February 15 to June 30, 2020.

Borrowers can choose which 8 weeks they want to count toward the covered period, which can start as early as February 15, 2020.

How much of the loan will be forgiven

The PPP is designed to help small businesses retain employees, at their current base pay. If small businesses keep all employees, the entirety of the loan will be forgiven.

If a business still lays off employees, the forgiveness will be reduced by the percent decrease in the number of employees.

If total payroll expenses on workers making less than $100,000 annually decreases by more than 25 percent, loan forgiveness will be reduced by the same amount.

If a small business has already laid off some employees, the loan can still be forgiven for the full amount of payroll cost if employees are rehired by June 30, 2020.

Responsibility for interest on the forgiven loan amount

If the full principal of the PPP loan is forgiven, the borrower is not responsible for the interest accrued in the 8-week covered period.

The remainder of the loan that is not forgiven will operate according to the loan terms agreed upon by the borrower and the lender.

Interest rate and terms for the loan amount that is not forgiven

The terms of the loan not forgiven may differ on a case-by-case basis. However, the maximum terms of the loan feature a 10-year term with interest capped at 4 percent and a 100 percent loan guarantee by the SBA.

The loan borrower will not have to pay any fees on the loan, and collateral requirements and personal guarantees are waived. Loan payments will be deferred for at least six months and up to one year starting at the origination of the loan.

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This article provides general information and shouldn’t be construed as legal or HR advice. Since employment laws may change over time and can vary by location and industry, please consult a lawyer or HR expert for advice specific to your business. You can also contact Payroll Systems to inquire about our HR support services.