CARES Act: Paycheck Protection Program

Apr 6, 2020

If you are a small business or self-employed individual under financial stress due to the Coronavirus, the Paycheck Protection Program is intended to help you through this difficult time by providing funds for payroll. If you qualify, this financial relief may be what saves your company.

Small businesses under 500 employees now have access to $350 billion in government-backed loans to provide financial relief from the economic impact of the Coronavirus. If you follow the right steps and meet certain requirements, all or a portion of the loan will be forgiven by the federal government. Therefore, what starts out as a loan can become a grant.

The Paycheck Protection Program (PPP) is the largest section of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. It began accepting application on April 3 for small businesses and April 10 for the self-employed. The basic provisions of the program are outlined below.

How does it work?

An application is made for this emergency loan through a private bank or other lender that has been approved by the Small Business Administration (SBA). The SBA will guarantee the loan. No personal guarantees or collateral are required. If the funds are used to maintain your employees through June and pay for certain overhead expenses, the loan is forgiven. This program is meant to prevent the layoff of workers and/or the rehiring of workers already laid-off due to COVID-19.

What business entities qualify?

Any small business or 501(c)(3) non-profit organization with fewer than 500 employees qualifies. The number of employees can be up to 1500 for some select businesses. Full-time, part-time, as well as contract employees are included in the count. In addition, some 501(c)(19) veteran organizations are eligible.

In addition, this program is available to self-employed individuals, sole proprietors, and freelance workers.

In all cases, the business must have been operational by February 15, 2020.

How much can you borrow?

The maximum amount that can be borrowed is 2.5 times the business’s average monthly payroll plus benefits for the prior twelve months, but cannot exceed $10 million. When calculating, you can only include wages up to $100,000 per employee. Therefore, if an employee makes $150,000, only $100,000 can be included to calculate the average monthly payroll. As an example, if your average monthly amount is $500,000, then your maximum loan is $1,250,000 (2.5 X $500K).

No loan payments are required during the first six months. The loan borrowing rate is 0.5% and matures after two years.

How to turn the loan into a grant?

To make the loan a grant, you must continue to maintain the same number of employees at the same pay level for the eight weeks following the loan origination date. That amount plus lease payments, mortgage interest, and utility payments over that time period will total the amount of the loan eligible for forgiveness.


This Paycheck Protection Program can be a game changer for our country’s small business and self-employed sectors during this economically devastating time. If you qualify, pull together the necessary financial information for the loan application and apply as soon as you can. It is anticipated that a large number of applications will be submitted.

We will get through this global Coronavirus pandemic and having these funds to help stabilize your business during these uncertain times will put you in a better place when our economic environment strengthens again.

Up Next: CARES Act: Benefits for Families

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