FAQs CARES Acts Paycheck Protection Program

 

Frequently Asked Questions

Who can apply?

All small businesses with 500 or fewer employees, including:

  • Nonprofit organizations
  • Veteran organizations
  • Tribal business concerns
  • Sole proprietors
  • Independent contractors

Businesses with more than 500 employees are eligible in certain industries:

  • If you are in the hotel and food services sector (NAICS 72), the 500-employee rule is applied on a per physical location basis.
  • If you are operating as a franchise or receive financial assistance from an approved Small Business Investment Company the normal affiliation rules do not apply.

What can the loan be used for?

Loan proceeds must be used for:

  • Payroll costs, including benefits
  • Interest on mortgage obligations, incurred before February 15, 2020
  • Rent, under lease agreements in place before February 15, 2020
  • Utilities, for which service began February 15, 2020

Due to anticipated high subscription, not more than 25% of the loan proceeds may be used for non-payroll costs.

What counts as payroll cost?

Payroll costs include:

  • Salary, wage, commission, or tips (capped at $100,000 annualized for each employee)
  • Payments for vacation, parental, family, medical, or sick leave
  • Allowance for dismissal or separation (severance costs)
  • Group health care benefits, including insurance premiums
  • Retirement benefits
  • State or local tax assessed on employee compensation
  • For a sole proprietor or independent contractor: wages, commissions, income, or net earnings form self-employment, capped at $100,000 annualized for each employee.

How much can be borrowed?

Eligible applicants can borrow up to $10 million determined by 8 weeks of prior average payroll plus an additional 25% of that amount. Payroll costs are capped at $100,000 on an annualized basis for each employee.

How much of the loan will be forgiven?

Full loan amounts will be forgiven as long as:

  • Loan proceeds are used to cover payroll costs, mortgage interest, rent, and utility costs over the 8 week period after the loan is made: and
  • Employee headcount and compensation levels are maintained.

Loan forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Borrowers will owe money when the loan is due if full-time headcount declines, or if salaries and wages decrease by more than 25% for any employee that made less than $100,000 annualized in 2019.

Do I need to pledge any collateral for these loans?

No. No collateral is required.

Do I need to personally guarantee this loan?

No. There is no personal guarantee requirement. However, if the proceeds are used for fraudulent purposes, the U.S. government will pursue criminal charges against you.

What information is needed to apply?

EMPLOYERS

  1. Valid business license
  2. Formation documents (Articles of Incorporation, LLC Operating Agreement, General Partnership Agreement)
  3. Payroll data (or Profit & Loss statement containing eligible items listed below)

Items that are eligible:

  • Salary, wage, commission, or tips (capped at $100,000 annualized for each employee)
  • Payments for vacation, parental, family, medical, or sick leave
  • Allowance for dismissal or separation (severance costs)
  • Group health care benefits, including insurance premiums
  • Retirement benefits
  • State or local tax assessed on employee compensation

SOLE PROPRIETORS OR INDEPENDENT CONTRACTORS

  1. 2019 Payroll tax filings reported to the IRS
  2. 2019 Forms 1099-MISC

Items that are eligible:

  • Wage, commission, income, net earnings from self-employment, or similar compensation; and
  • An amount that is not more than $100,000 in one year, as pro-rated for the covered period

We recommend your accountant review these definitions in preparing payroll records for loan submission. The Act also requires documentation for loan forgiveness.