The CARES Act specifically outlines the Paycheck Protection Program, a forgivable loan program that allows small businesses to get cash quickly and incentivizes them to not lay off employees.
Paycheck Protection Program
Who qualifies for a forgivable loan?
Businesses with 500 or fewer employees
How much are the loans for?
Loan amounts for established businesses:
- 2.5x monthly average payroll costs (based on payroll costs in 2019)
- $10 million limit
Loan amounts for new and seasonal businesses:
- 2.5x monthly average payroll costs (Based on whichever time period is applicable: March 1, 2019 – June 30, 2019 or Jan. 1, 2020 – Feb. 29, 2020)
- Payroll cost cap of $100,000 per employee (annualized)
What is the interest rate?
1% fixed rate
When can businesses apply?
April 3 for small businesses and sole proprietors
April 10 for self-employed individuals and independent contractors
How can businesses apply?
Businesses can apply through the following:
- Existing SBA lenders
- Federally insured banks
- Federally insured credit unions
- Farm Credit System institutions
What qualifications does a business have to meet for their loan to be forgiven?
The loan should be used to pay for the following expenses over an 8 week period after receiving the loan:
- Mortgage interest
Forgiveness is reduced if a business decreases full-time employee headcount or if they decrease wages by more than 25% for any employee who makes less than $100,000 in 2019.
When do businesses have to start paying loan interest?
Payments are deferred 6 months, but interest will accrue over that time.
When are these loans due?
In 2 years.
Quick facts for business taxes
- Refundable tax credit on 50% of worker wages paid between March 12, 2020 and Jan. 1, 2021 with a maximum amount of $10,000 in qualified wages per employee.
- Employers’ portions of payroll taxes for Social Security will be delayed until 2021 and 2022.
- Net operating loss rules under the Tax Cuts and Jobs Act have been modified. Losses for 2018, 2019, and 2020 can be carried back 5 years and the 80% rule is suspended until 2021.
Looking for more information about small business relief? Check out 5 Ways Businesses Can Maximize Cash Flow Under the CARES Act.