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Paycheck Protection Program

Date: March 30, 2020


The Coronavirus Aid, Relief, and Economic Security (CARES) Act has allocated $350 billion to help small businesses keep workers employed amid the pandemic and economic downturn. The Payroll Protection Program is designed to provide forgivable loans to business concerns of less than 500 employees, including the self-employed.

  • The amount of the loan is equal to 2 ½ times your prior twelve-month average payroll.

  • The proceeds can be used to cover Qualified Expenses which are payroll, rents, mortgages, utilities, and interest on preexisting indebtedness.

  • Except for payment of interest on preexisting indebtedness, using the loan for these qualified expenditures can result in a non-taxable forgiveness of the loan.

  • The amount of forgiveness will be reduced if you have a reduction in employees or material salary reductions, which would frustrate the purpose of the program which is to keep American workers employed.

  • Unlike other SBA loans administrative fees, a personal guarantee, and collateral will not be required. Nor is it required that you be unable to get obtain credit elsewhere


We strongly suggest that small business owners review their situation with their financial and tax advisors to consider the advantages of this generous program. If you decide to proceed, the first step is to identify a bank that is participating in the program and completing their loan application. This is very time sensitive.

You will need to determine for the year prior 12 months average monthly payroll costs which is broadly defined as including not just wages, but also commissions and payments to certain independent contractors, employee benefits, state employment taxes, but Payroll Costs do not include federal taxes, salaries to extent they exceed $100,000 per individual, nor payments to those who do not principally reside in the US nor where a credit was allowed for sick leave or family leave under another program.

In the loan application you will need to make a good faith Certification that “the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of”- your business. You will need to Acknowledge that “funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments.” Further you must not have another loan under this program pending nor have received a loan previously under this program.


Once you have spent the funds, then soon after June 30th you can apply for the loan forgiveness. The eligible amount for loan forgiveness equals the amount the borrower spent during the 8-week period beginning on the date of the origination of the loan. A lender must issue a decision on an application for loan forgiveness within 60 days of receiving the application The Federal government and not the lender bear the impact of the forgiveness.

The loan Forgiveness application must include documentation and certification that amount for which forgiveness is requested was used to retain employees, interest payments on a mortgage, rent payments, and utility (includes phone and internet) payments. The documentation should include IRS payroll tax filings, and State income; payroll, and unemployment insurance filings; cancelled checks, payment receipts, transcripts of accounts, among others.