The Coronavirus Aid, Relief and Economic Security Act (CARES Act) includes a section for a new SBA loan program titled Paycheck Protection Program (PPP). Although many of the process and procedures are still being crafted by SBA, below is a summary of keys facts about the program (as it stands today):


Paycheck Protection Program    $349B Authorized through June 30th

  • These are 7A Loans with a 100% guaranty to the Bank
  • Unsecured
  • No Personal Guaranty
  • No Guaranty Fee paid by borrower
  • Bank pays no servicing fee to SBA
  • Use 7A Application Forms


Maximum Loan Amount Calculation 

The maximum loan amount is defined as the average monthly payroll cost incurred during the 1 year period before which the loan was made, times 2.5 and limited to $10,000,000  

  • Seasonal business calculate the average Payroll cost as either:
    • the average total monthly payments for payroll shall be for the 12-week period beginning February 15, 2019
    • Or at the election of the eligible recipient, March 1, 2019, and ending June 30, 2019 
  • Businesses that were not in business during the period Feb 15, 2019 thru June 30, 2019, can average the monthly Payroll expense during Jan 1, 2020 to Fed 29, 2020


Payroll is defined as the sum of the eligible items listed below— 

  • salary, wage, commission, or similar compensation;
  • payment of cash tip or equivalent; 
  • payment for vacation, parental, family, medical, or sick leave; 
  • allowance for dismissal or separation; 
  • payment required for the provisions of group health care benefits, including insurance premiums; 
  • payment of any retirement benefit
  • payment of State or local tax assessed on the compensation of employees; and 
  • the sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in 1 year, as prorated for the covered period; 
  • Excluded —
    • the compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the covered period;
    • taxes imposed or withheld under chapters 21, 22, or 24 19 of the Internal Revenue Code of 20 1986 during the covered period;
    • any compensation of an employee whose principal place of residence is outside of the United States; 
    • qualified sick leave wages for which a credit is allowed under section 7001 of the 4 Families First Coronavirus Response Act (Public Law 116– 6 127); or 
    • qualified family leave wages for which a credit is allowed under section 7003 of the Families First Coronavirus Response Act (Public Law 116– 12 127); and

Loan Terms 

  • Payment deferral for first 12 months 
  • Maximum term 10 Years from date of debt forgiveness application


Interest Rates – 

  • 4.00% Fixed Interest Rate


Use of Proceeds

  • Any 7A use
  • However only the amounts paid for the following within the 8 weeks after loan origination are eligible for Debt Forgiveness
    • Payroll costs (excludes comp for individual over $100K)
    • Rent
    • Mortgage Interest 
    • Utilities

Debt Forgiveness

  • The total amount of proceeds used for Payroll, Rent, Mortgage Interest & Utilities paid in the 8 weeks after loan origination.
  • Forgiveness amount is reduced based on number of FTE or reduced, or reductions in comp for individual more than 25%, during that period 
  • No reduction in forgiveness for termination or pay cut prior to 4-1-20 and reversed before 6-30-20
  • Borrower submits certified report to lender – lender reports online to SBA – payment is processed to lender within 5 days 


Borrower Requirements

  • Must meet SBA definition of small business (generally under 500 employees but some variation by NAICS codes) Non-Profits are also eligible.
  • Borrower was in operation on February 15, 2020
  • Had employees for whom the borrower paid salaries and payroll taxes or paid independent contractors
  • Borrower must certify:
    • That the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the recipient
    • Proceeds will be used to retain workers, maintain Payroll, pay Rent, Mortgage Interest, Utilities
    • Intent to maintain certain number of FTE through June 30 based on the number used to determine maximum loan amount
    • (NEW) A borrower may have both an SBA Disaster loan and a PPP loan