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Paycheck Protection Program – CARES Act Small Business Administration Loans

Mark Puckett, CPA


Paycheck Protection Program – CARES Act Small Business Administration Loans (Update)
We are releasing an update to our previous email. Due to the changing nature of the loan initiative discussed below, please contact your lender for the most up-to-date information.  
(April 1, 2020 | 8:45 p.m.) 



The Coronavirus Aid, Relief and Economic Security (CARES) Act was enacted March 27, 2020 and provides an unprecedented level of national emergency assistance for individuals, families and businesses impacted by the Coronavirus pandemic. The Act provides for a loan program that will be administered by the Small Business Administration (SBA) and provides up to $349 billion in loans to eligible borrowers with the express intention of motivating employers to retain and re-hire employees.
The Loan Program

Among the economic relief provisions of the CARES Act, the Paycheck Protection Loan Program establishes a loan regime that allows qualifying businesses negatively impacted by the Coronavirus pandemic to obtain loans through the SBA to fund a variety of qualified costs including:

  • Payroll costs
  • Continuation of health care benefits
  • Employee salaries and commissions for U.S. based employees (up to $100,000 per person)
  • Mortgage interest obligations (but not loan principal)
  • Rent
  • Utilities
  • Interest on any other debt obligations incurred before the covered period

Qualifying businesses can apply through banks that are already authorized to make loans under the SBA’s existing 7(a) loan program. The SBA and the Secretary of the Treasury will also extend eligibility to additional qualified lenders that do not currently participate in such program. Repayment of a Paycheck Protection loan may be fully or partially guaranteed by the SBA. Neither the SBA nor any participating lenders will charge fees to the borrowers.


Borrowers with 500 or fewer employees (or a greater number based on the size standard applicable to the industry) may be eligible:
  • For-profit businesses of all types, including self-employed individuals, independent contractors and sole proprietorships
  • Nonprofit organizations exempt under Section 501(c)(3)
  • Veterans organizations
  • Tribal businesses

The Act contains exceptions to standard SBA rules that relax eligibility restrictions for certain covered entities such as businesses in the accommodation and food service industry (NAICS 72) that have less than 500 employees per physical location. Other exceptions include franchises assigned a franchise identifier code and businesses licensed under Section 301 of the Small Business Investment Act.

Loan Amount & Terms

The maximum loan amount permitted for an eligible borrower is equal to the lesser of 2.5 times the average monthly payroll costs incurred in the one-year period before the loan is made (except for seasonal employers and employers not in business between February 15, 2019 and July 30, 2019), or $10,000,000.

Loans are available for an amortizing term of up to 2 years at 0.5 percent interest.  The SBA will direct lenders to defer payment of both principal and interest for a minimum of 6 months and up to a maximum of 12 months.  Borrowers will not be required to pledge any collateral or provide personal guarantees to secure the loans.

Loan Forgiveness

Borrowers will be eligible for loan forgiveness equal to the amount spent by the borrower during an 8-week period following the loan disbursement actually spent on rent, payroll and benefit costs, utilities and mortgage interest.

The loan forgiveness amount is subject to reduction if the borrower terminates employees or reduces employee salaries and wages during the 8-week forgiveness period.  Reductions in workforce, salaries and wages that occur from February 15, 2020 to April 26, 2020 will be disregarded for purposes of reducing the forgiveness amount so long as the reductions are eliminated by June 30, 2020.

Borrowers who satisfy the requirements for loan forgiveness will be able to exclude the forgiveness amount from taxable income.
Continue to monitor ATA’s COVID-19 resource page for more information. Please know that we continue to be here to partner with you and amplify your business. 

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