1) What is the CARES Act/Paycheck Protection Program Loan?

The Coronavirus Aid, Relief, and Economic Security (CARES) Act allocated $350 billion to help small businesses keep workers employed amid the pandemic and economic downturn. Known as the Paycheck Protection Program, the initiative provides 100% federally guaranteed loans to small businesses.

2) Who Can Apply for Paycheck Protection Loans?

• Businesses and entities must have been in operation on February 15, 2020 (and must have had paid salaries, payroll taxes, or paid an independent contractor).
• Businesses – including eligible non-profits, Veterans organizations, Tribal concerns, sole proprietorships, self-employed individuals, and independent contractors described in the Small Business Act – with 500 or fewer employees may apply. 
  • Any type of employee counts towards the 500 (Full-time, part-time and anything else)
  • Below are some special rules:
    • If you are in the accommodation 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

3) When Can I Apply for the Paycheck Protection Program Loan?

Starting April 3, 2020, small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders. Beginning April 10, 2020, independent contractors and self-employed individuals can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders. Other regulated lenders will be available to make these loans as soon as they are approved and enrolled in the program. Although the program was recently extended until August 8, 2020, we encourage you to apply as quickly as you can because there is a funding cap and lenders need time to process your loan.  

4) Where Can I Apply for These Loans?

You can apply through any existing SBA lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating.

Visit www.sba.gov for a list of SBA lenders.  You will need to complete the Paycheck Protection Program loan application and submit the application with the required documentation to an approved lender that is available to process your application by August 8, 2020.

5) What Specific Documentation Will be Needed to Apply?

• Articles of Incorporation/Organization of each borrowing entity
• Bylaws/Operating Agreement of each borrowing entity
• All owners' Driver's Licenses
• Payroll Expense Verification Documents To Include:
  • IRS Form 940 and 941 
  • Payroll Summary Report with corresponding bank statement
  • If a Payroll Summary Report is not available, Employee Pay Stubs as of February 15, 2020 (for corresponding period) with corresponding bank statement and breakdown of payroll benefits (vacation, allowance for dismissal, group healthcare benefits, retirement benefits, etc.)
  • 1099s (if Independent Contractor)
• Certification that all employees live within the United States. If any do not, provide a detailed list with corresponding salaries of all employees outside the United States
• Trailing twelve-month profit and loss statement (as of the date of application) for all applicants
• Most recent Mortgage Statement or Rent Statement (Lease)
• Most recent Utility Bills (Electric, Gas, Telephone, Internet, Water)

6) What Will Lenders be Looking for?

In evaluating eligibility, lenders are directed to consider whether the borrower was in operation before February 15, 2020 and had employees for whom they paid salaries and payroll taxes or paid independent contractors. 

Lenders will also ask you for a good faith certification that: 

• The uncertainty of current economic conditions makes the loan request necessary to support ongoing operations.
• The borrower will use the loan proceeds to retain workers and maintain payroll or make mortgage, lease, and utility payments.
• Borrower does not have an application pending for a loan duplicative of the purpose and amounts applied for here.
• From Feb. 15, 2020 to Dec. 31, 2020, the borrower has not received a loan duplicative of the purpose and amounts applied for here (Note: There is an opportunity to fold emergency loans made between Jan. 31, 2020 and the date this loan program becomes available into a new loan).
• If you are an independent contractor, sole proprietor, or self-employed individual, lenders will also be looking for certain documents (final requirements will be announced by the government) such as payroll tax filings, Forms 1099-MISC, and income and expenses from the sole proprietorship. 

7) What is the Potential Size of My Paycheck Protection Program Loan? 

• Loans can be for up to two months of your average monthly payroll costs from the last year plus an additional 25% of that amount. That amount is subject to a $10 million cap. If you are a seasonal or new business, you will use different applicable time periods for your calculation. Payroll costs will be capped at $100,000 annualized for each employee.  
• For businesses NOT operational in 2019: 2.5 x Average total monthly payroll costs incurred for January and February 2020 
• For seasonal employers: 2.5 x Average total monthly payments for payroll costs for the 12-week period beginning February 15, 2019 or March 1, 2019 (decided by the loan recipient) and ending June 30, 2019

8) What Qualifies as Payroll Costs?

Payroll costs include: Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee); Employee benefits including costs for vacation, parental, family, medical, or sick leave, allowance for separation or dismissal, payments required for the provisions of group health care benefits including insurance premiums, and payment of any retirement benefit; State and local taxes assessed on compensation; and for a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.

9) How Long Do I Have to Rehire Staff?

You have until Dec. 31, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.  

10) What Are the Allowable Uses of These Loans?

• Payroll costs (as noted in FAQ section above)
• Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums
• Payments of interest on any mortgage obligation (which shall not include any prepayment of or payment of principal on a mortgage obligation)
• Rent
• Utilities
• Interest on any other debt obligations that were incurred before the covered period

11) What are the terms of the Paycheck Protection Program Loan?

The interest rate is fixed at 1.0%. The loan is due in 5 years and there is no prepayment penalty. All payments are deferred for 6 months, however, interest will continue to accrue over this period. No collateral is required and there is no personal guarantee. However, if the proceeds are used for fraudulent purposes, the U.S. government will pursue criminal charges against you.  

12) How Much of My Loan Will Be Forgiven?

​You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 24 weeks after getting the loan. Due to likely high subscription, it is anticipated that not more than 40% of the forgiven amount may be for non-payroll costs. You will also owe money if you do not maintain your staff and payroll. Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.  

13) How Can I Request Loan Forgiveness?

​You can submit a request to the lender that is servicing the loan. The request will include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. You must certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments. The lender must make a decision on the forgiveness within 60 days.