Over the past week, federal legislators have made rapid strides in expanding the Coronavirus relief aid to be provided to individuals and businesses vis a vis the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). From paycheck protection programs to net operating loss provisions, we have it all broken down for you.
Paycheck Protection Program
The Small Business Paycheck Protection Program set forth under the CARES Act is a $349 billion lending program
that will provide up to $10 million in loans to qualifying businesses for the covered lending period of February 15,
2020 through December 31, 2020. This program is separate from the Small Business Administration (the “SBA”)
Economic Injury Disaster Loans. Under the Paycheck Protection Program, generally, businesses with 500 or fewer
employees, including not-for-profit corporations with 501(c)(3) status, as well as sole proprietors, the selfemployed and independent contractors, may qualify to receive federal loans. Under this program, loans are
provided in amounts up to the lesser of (i) two and a half months of payroll costs (excluding compensation to
employees earning greater than $100,000 per year) plus any outstanding amount of SBA Economic Injury Disaster
Loan obtained on or after January 31, 2020, or (ii) $10 million. Qualified applicants are not required to provide
personal guarantees or collateral security to obtain loan funds.
In order to obtain loans under this program, applicant businesses must make a good faith certification of the
following: (i) the uncertainty of current economic conditions makes the loan request necessary to support its
ongoing operations; (ii) funds will be used to retain workers and maintain payroll or make mortgage payments,
lease payments and utility payments; (iii) the applicant has not already applied for a loan under the Payroll
Protection Program; and (iv) during the period February 15, 2020 – December 31, 2020 the applicant has not
already received a covered loan under the Payroll Protection Program.
Furthermore, borrowers eligible to receive loans under the Paycheck Protection Program may be eligible for loan
forgiveness (not to exceed the principal amount of the loans received) in an amount equal to the sum of certain
permitted costs, such as payroll, rent and utilities, and interest payments on mortgages so long as such costs
existed prior to February 15, 2020 and are paid during the eight-week period commencing on the date of the loan.
The loan forgiveness may be reduced if the recipient business reduces its number of full time employees as
compared to the average number of full time employees per month employed by the recipient during the period
beginning February 15, 2019 and ending on June 30, 2019 OR January 1, 2020 and ending on February 29, 2020.
Loan forgiveness may also be reduced if the recipient employer reduces the total salaries or wages of any
employees in excess of 25 percent (other than those employees earning $100,000 per year or greater). Loan
forgiveness will not be reduced where layoffs are made within 30 days of the enactment of the CARES Act,
provided that the laid off employees are re-hired at 75% or more of their previous wage rate by June 30, 2020.
Please don’t hesitate to reach out to our Labor & Employment team, we are not just attorneys we are parents, sons and daughters and business owners too.