The Small Business Assistance Center Information on:

CARES (Coronavirus, Aid, Relief, and Economic Security) ACT

Paycheck Protection Program

Title 1 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act included $349 billion in lending capital, which includes the Paycheck Protection Program, created to help small businesses (fewer than 500 employees) impacted by the pandemic and economic downturn to make payroll and cover other expenses from February 15 to June 30.

As part of them CARES ACT is the “Keeping American Workers Paid and Employed Act” which helps small businesses and their employees who are adversely affected by the outbreak of the corona virus (COVID-19) pandemic. The basis of the provision is the “Paycheck Protection Program” an emergency lending program, that is administered by the Small Business Administration (SBA) under its 7(a) lending program, to provide small business loans on favorable terms to borrowers impacted by the current economic situation.

  • Small businesses may take out loans up to $10 million—limited to a formula tied to payroll costs—and can cover employees making up to $100,000 per year.
  • Loans may be forgiven if a firm uses the loan for payroll, interest payments on mortgages, rent, and utilities and would be reduced proportionally by any reduction in employees retained compared to the prior year and a 25 percent or greater reduction in employee compensation

The “Paycheck Protection Program” created by Congress is intended to accomplish two essential goals:

1) help small businesses cover their operating expenses during the worst of the crisis

2) provide a powerful incentive for employers to retain their employees

Basically, it is aimed to be a partial revenue replacement program to allow deeply affected businesses to take cover through this period “shelter in place” has and is continuing to cause severe disruptions – without making drastic changes to their footprint.

The program is for small to mid-size businesses, nonprofits, Tribal businesses, and veteran’s organizations with 500 employees or less are eligible for the SBA’s federally insured program with  partially forgivable loans that can be used to cover short-term operating expenses during the economic pandemic crisis.

  • The maximum loan size is equivalent to 250 percent of the employer’s average monthly payroll costs (e.g., roughly 10 weeks of payroll expenses) or $10 million, whichever is less.
  • Payroll costs are defined broadly to include wages, salaries, retirement contributions, healthcare benefits, covered leave, and other expenses.
  • The program features six months to one year of deferred repayment, fee waivers
  • Streamlined application requirements
  • Borrowers would be eligible for loan forgiveness equivalent to the sum spent on covered expenses during the eight-week period after the loan is originated.
  • Stated covered expenses include the bulk of a typical business’s fixed operating costs: payroll, rent, utilities, and mortgage interest obligations.
  • The forgivable environment of these loans in effect turns them into grants, meaning that qualifying businesses will not see a significant increase in their debt burdens.
  • In order to qualify for forgiveness, employers must maintain their pre-crisis level of full-time equivalent employees, or else face a reduction in forgiveness proportional to the reduction in headcount.
  • Added feature -since many small businesses have already been forced to make staffing reductions in response to vanishing customers and lost revenues, the legislation includes a clause that allows them to qualify for loan forgiveness if they have re-hired back to pre-crisis levels by June 30, 2020.

Congress made the terms generous and the barriers to apply low in an effort to confirm resources would be made available as quickly as possible to needy businesses.

  • Borrowers do not need to demonstrate actual economic harm in order to qualify.
  • The small business or nonprofit organization will simply need to make a series of good faith certifications, primarily that current economic conditions necessitate the loan to support ongoing business operations, and that the funds will be used to maintain payroll and address other covered expenses.

To apply the following documents are required:

Application process

Documentation that verifies the number FTE (full time employees) on payroll and pay rates for the periods identified under the reduction for loan forgiveness above. Such as:

  • Payroll tax filings to the IRS, state payroll and SUTA filings
  • Financial statements verifying payment on debt obligations incurred before the covered period.
  • And, any other documents the SBA may ask for

For assistance in applying for the Paycheck Protection Program please contact us at 708-400-6404 or email at