CARES Act – Paycheck Protection Program

Congress passed and President Trump signed into law the CARES Act on March 27, 2020. The CARES Act is "Phase 3" in the federal response to the COVID-19 global health crisis. This is the largest stimulus package in the history of the U.S. We are only seeing the beginning of this battle with the Novel Coronavirus, and this will most likely not be the last stimulus package this year. This bill includes $349 billion in funding for the new "Paycheck Protection Program."

What is the Paycheck Protection Program?

The Paycheck Protection Program, or "PPP," is a loan to provide direct assistance to small businesses with 500 or fewer employees—including nonprofits, veterans organizations, self-employed individuals, sole proprietorships, and independent contractors. Businesses with more than 500 employees are eligible in certain industries. This loan provides assistance to cover payroll for up to eight weeks, rent, mortgage interest or utilities. Funds are provided in the form of loans that will be fully forgiven when used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must be used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees. Full forgiveness of this loan is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease. Interest rates for these loans cannot exceed 4%.

How to Apply:

You can apply through any existing SBA 7(a) 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 in the program. Lenders may begin processing loan applications as soon as April 3, 2020

Links:

Freeman Law - Compendium of Recent Coronavirus Legislation and Regulatory Reform (.pdf) Department of the Treasury - Assistance for Small Business (website)  

Sources: Senator John Cornyn's Office, the US Department of the Treasury, and Freeman Law PLLC.