Small business employers have been impacted especially hard by the unprecedented fallout of the COVID-19 pandemic as many businesses have been forced to temporarily close, change their service delivery methods, and incur additional expenses or reduced revenues. As these entities now grapple with the reality of dealing with these new economic conditions, congress provided relief in the recently passed Coronavirus Aide, Relief, and Security (CARES) Act as of March 25, 2020.

Paycheck Protection Program

Division A, known as the Keeping American Workers Paid and Employed Act, provides emergency economic relief of $377 billion for small businesses in order to assist them in meeting their payroll and other expenses and creates a program administered through the U.S. Small Business Administration (SBA) called the “Paycheck Protection Program.”

Key provisions of the Paycheck Protection Program include:

  • Providing $350 billion in support loans for eligible small businesses defined as:
    • Small employers with 500 or fewer employees
    • Self-employed and “gig economy” individuals
    • Certain nonprofit organizations, including 501(c)(3) and 501(c)(19) veteran organizations and tribal business concerns with under 500 employees
  • The size of the loans would equal 250 percent of an employer’s average monthly payroll with a maximum loan available of $10 million.
    • Loans can be used to cover payroll costs, including salaries, wages, and tips; state and local tax assessments; employee group health insurance; retirement contributions; and payments for vacation, parental, family, and medical or sick leave.
    • Eligible compensation is capped at an annual salary of $100,000.
    • Loans can also be used for payments of interest on mortgage obligations, rent, utilities, and interest on any other debt obligation that was incurred before the covered period.
  • Loans will be available through more than 800 existing SBA-certified lenders, including banks, credit unions, and other financial institutions.
    • Costs of participation in the program are reduced for both borrowers and lenders by waiving fees, providing for automatic deferment of payments for one year, and omitting prepayment penalties.

Loan Forgiveness

The goal of the program is to provide 8 weeks of cash flow assistance through these guaranteed loans for the covered period of February 15, 2020, through June 30, 2020. Small employers are encouraged to maintain their payroll during this period, and if the employer maintains its payroll, then a portion of the loan will be forgiven.

Going Forward

The SBA has been tasked with administering the program and providing guidance to lenders and employers.

The professionals at CRI are here to help you navigate the application process and to assist you in gathering the required information. We will keep monitoring updates as they occur and posting them to our COVID-19 Resource Page.

For additional questions on how to apply, whether your small business qualifies, or any other concern, please contact your CRI Advisor.