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The CARES Act Paycheck Protection Program Loans can help provide small businesses with assistance to continue payroll during the COVID-19 emergency.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act has recently been passed by Congress to help small businesses that have been negatively affected by the recent COVID-19 pandemic.  One option available is Paycheck Protection Program Loans.

Paycheck Protection Program Loans

Paycheck Protection Program (PPP) Loans aid small businesses by helping them continue their payroll during the COVID-19 emergency.  These loans are available to businesses impacted between February 15, 2020 and June 30, 2020, with the ability to be retroactive to February 15 to help bring previously laid off workers back onto payroll.  One appealing feature is the potential for loan forgiveness up to the sum of eight weeks of payroll expenses based on employee retention and salary.

Overview of Details:
  • Eligibility requirements:
    • Businesses under 500 total employees (some exceptions apply) including 501(c)3 nonprofits, 501(c)19 veterans’ organizations, and Tribal businesses described in section 31(b)(2)(C).
    • Sole Proprietorship, independent contractor, and certain eligible self-employed individuals.
  • Loan size:
    • Businesses operating from February 15, 2019 to June 30, 2019 will have a max loan equal to 250% of the average monthly payroll costs during that time period.
    • Business not operating in the above time frame will have a max loan amount equal to 250% of the average monthly payroll costs between January 1, 2020 and February 29, 2020.
    • Max loan size is $10 Million in all cases.
  • Covered Costs eligible for payroll:
    • Compensation; including payments on benefits, certain types of leave, state and local tax on compensation.
  • Costs not covered under payroll:
    • Employee or owner compensation over $100,000.
    • Certain taxes under chapters 21,22, and 24 of IRS code.
    • Compensation of employees who live outside of US.
    • Sick leave for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act.
  • Allowable use of loan proceeds:
    • Payroll costs; including continuation of health care benefits.
    • Payments on mortgage interest
    • Rent and utilities
    • Interest on any other debt obligations incurred before the covered period.
  • Loan forgiveness calculation:
    • Loan forgiveness is the sum of eligible payroll expenses for an eight-week period compared to the previous year or time period.
    • Also dependent on maintaining employees and wages.
  • Terms of the Loan:
    • Any amounts not forgiven will be subject to loan terms and conditions.
    • Loans are designed to be low interest to provide maximum assistance to small businesses. For full details, speak with your banker.

The details above are only an overview of the specifics of the PPP loans available to small businesses being impacted by the COVID-19 Pandemic. For a complete list of loan terms and conditions, contact your banker. By utilizing the PPP loans, a small business can maintain its payroll and put itself in a good position to bounce back when current emergency restrictions are relaxed.

If you’re interested in learning more about a PPP loan, contact a Bank of Southern California Banker today.