Understanding the CARES Act Paycheck Protection Program

Finance | Provided by Cornerstone

Who is Eligible?

In an effort to help small businesses and their employees, part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act provides for a Paycheck Protection Program (PPP). It is available to small businesses with less than 500 employees, and is also extended to sole proprietors and the self-employed. Restaurants (and their employees) have been hit the hardest in all of this, so there are specific provisions intended to help that industry, so restaurants qualify if they have less than 500 employees per location. The business can borrow 2.5x its monthly employee payroll (not to exceed $10M) and use the funds for payroll and building (rent/mortgage/utilities) expenses. The government is guaranteeing that amount, so there is no requirement that the business financially qualify. The interest rate on repayment is not to exceed 4%.

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Forgiveness Aspect of the Program

There is also a forgiveness aspect to the program. The borrower is eligible for forgiveness equal to the amount spent on those same expenses for the 8 weeks following loan origination. The forgiveness is reduced if there is more than a 25% reduction in number of employees or wages. However, there is a waiver of the reduction if the borrower re-hires and brings the number back to the pre-COVID 19 number by June 30. Repayment of the remaining loan for impacted borrowers can be delayed for six months to a year.


You can apply for this program through your lender starting Friday, April 3.

Other Options

There is still the option to go with the traditional disaster loan program through SBA.gov. All areas of the US qualify as disaster areas currently due to COVID-19. With the disaster loan, small business owners can get a $10,000 advance that doesn’t need to be repaid if they had a loss in revenue. So, some forgiveness aspect is possible, but not as liberal as the PPP.

The U.S. Chamber of Commerce has released guides on each of these types of loans: Coronavirus Emergency Loans Small Business Guide and Checklist and Guide to SBA’s Economic Injury Disaster Loans.

If you are interested in either of these programs, please reach out to your banker to inquire.

If you have any questions, we are here for you. Please reach out to your client manager or info@buildbeyond.com.

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