Paycheck Protection Program

S.B.A Paycheck Protection Program application deadline expired as of August 8th, 2020

Coronavirus Aid, Relief & Economic Securities (CARES) Act

$376 billion is made available for a new Small Business Administration Paycheck Protection Program (PPP). The program would provide cash-flow assistance through 100% federally guaranteed loans to employers who maintain their payroll during this emergency.


The Paycheck Protection Program is designed to provide a direct incentive for small businesses to keep their workers on payroll by providing each small business a loan up to $10 million for payroll and certain other expenses.  Small businesses and other eligible entities will be able to apply if they were harmed by COVID-19 between February 15, 2020, and Dec 30, 2020. This program is retroactive to February 15, 2020, in order to help bring workers who may have already been laid off back onto payrolls.

PPP has a host of attractive features, such as forgiveness of up to eight weeks of payroll based on employee retention and salary levels, no SBA fees and at least six months of deferral with maximum deferrals of up to a year.

Actual Senate CARES Act bill

If all employees are kept on payroll for eight weeks, SBA will forgive the portion of the loans used for payroll, rent, mortgage interest, or utilities. Up to 100 percent of the loan is forgivable,  which would help workers remain employed, as well as help affected small businesses and our economy to snap back quicker after the crisis.

The loan can effectively turn into a grant. Most, and in some cases all, of the loan will be forgiven if a company uses the money to retain workers or hire back positions it had to cut. The S.B.A. has waived many of its usual requirements for these loans and will not require collateral for them.  

How does the loan forgiveness work?  Both full and partial forgiveness is available.

Businesses can have their loans forgiven in full if they maintain their full-time equivalent head count (based on a 40-hour workweek) and wages for eight weeks after the loan is disbursed, the Treasury Department said. The agency said that “not more than 25 percent” of the forgiven amount may be used for nonpayroll costs, like rent.

Forgiveness will be “reduced” for companies that trim their head count or cut workers’ wages by more than 25 percent, the Treasury said. Also, businesses can borrow and have forgiven only the first $100,000 in payroll for each employee.

Companies can borrow up to two months of their average monthly payroll costs for the past year, plus an additional 25 percent, up to $10 million. “Payroll costs” include salary, wages, tips, commissions, paid leave benefits, employer-paid health insurance premiums, and state and local payroll taxes.

The program generally uses Feb. 15, 2020, for calculating your pre-pandemic payroll (seasonal businesses can use a different date).  As long as workers laid off after that date are brought back (or new workers are hired), the layoffs don’t affect a borrower’s eligibility for full forgiveness.

Business that need time to bring back workers will have to act swiftly, due to the eight-week clock beginning on the date that the loan is disbursed to the borrower, per the Treasury Department.   

© 2020 by SBA Loan Aid Financial Services. 

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