The Treasury Department has updated its primary guidance on the Paycheck Protection Program, in the form of an FAQ.  The guidance is available here.

Forgivable Loans

The Act provides for forgivable loans to middle-market businesses with less than 500 employees.  These loans will be available regardless of industry.  Agencies and dealerships with less than 500 employees are presumably eligible for these loans.  If you meet the qualifications, the loan will be forgiven and you will never need to repay it or pay taxes on the forgiven amount.

There is about $350 billion available for these loans.  However, experts tell us this will not be enough to meet the demand.  We suggest you apply as early as possible.  

How Do I Apply for a Loan?

The U.S. Small Business Administration ("SBA") is primarily responsible for providing and servicing the loans available under the Act.  However, the SBA is a government agency with limited resources and is already overwhelmed with requests for assistance during this economic crisis.  As such, private banks are also able to provide these loans.  It will take some time for all private banks to set up websites to accept applications.  Below are links to the banks we know of that have websites ready:

Does My Business Qualify?

Your business qualifies for a loan if you have less than 500 employees, including all individuals employed on a full-time and part-time basis.  You are also required to certify that your business needs a loan as part of the application process.

How Much Money Can I Borrow?

You can borrow the sum of the average total monthly payments listed below, during the one-year period before the date of the loan, multiplied by 2.5:

  • Salaries, wages, commission, and other compensation

  • Cash payments

  • Payment for paid leave

  • Severance payments

  • Group health benefit payments

  • Retirement benefit payments

  • State or local taxes paid on the employee compensation

  • Wages, commission, income, net earnings, or similar comp to an independent contractor


For any employee or independent contractor making over $100K per year (prorated based on Feb 15, 2020 through June 30, 2020) you can only include $100K.

How Can I Use the Funds?

You can use the funds for any of the following purposes:

  • Payroll costs

  • Benefits, including paid leave and paid time off

  • Payment of interest on mortgages (but not prepayment or principal payments)

  • Rent

  • Utilities

  • Interest on debt payments

Do I Have to Repay the Loan?

The loan will be forgiven in an amount equal to the costs listed below that you incur during the 8-week period following the date you receive the loan: 

  • Payroll costs

  • Interest on mortgages (but not prepayment or principal payments)

  • Rent

  • Utility payments

If all or a part of the loan is forgiven, you do not have to pay taxes on the amount forgiven.

How Much of the Loan Will be Forgiven?

The federal government wants you to keep people employed and to keep paying them well.  As such, the amount of the loan that will be forgiven is reduced if you make lay offs or if you reduce employees' pay.  

If you lay off employees, the amount of loan forgiveness will be reduced by the percentage of FTE that you reduce during the 8 weeks following the date you receive the loan.  Here's the formula:

  • Calculate the average number of FTE per month during the 8 weeks following the loan date.

  • Divide by either of the following (you can choose which works best for you):

    • The average number of FTE per month during February 15, 2019, and June 30, 2019.​

    • The average number of FTE per month during January 1, 2020, and February 29, 2020.

If you've already laid off employees, you can hire them back and they will count.

If you reduce employees' pay, the amount of loan forgiveness will be reduced, dollar-for-dollar, based on the amount that you reduce employees' pay.  Here's the formula:

  • Create a list of all employees who did not make more than $3,846 in any single pay period during 2019.

  • For each employee on the list, identify the employees whose salary was reduced by more than 25% of their salary during the most recent full quarter.

  • Total the amount of salary reduction from the list above that is more than 25% of their salary during the most recent full quarter.

What if the Entire Loan is not Forgiven?

If all or a part of the loan is not forgiven, the remaining amount will be amortized over 2 years at an interest rate of 1%.

Where can I Find More Information?

Many law firms, accountants, and other professionals are publishing their interpretation of the Act and you're likely inundated with information.  Please remember that these publications are based on each author's own view and not necessarily accurate in practice.  

On March 31, the U.S. Treasury released this guidance on how the Act will be administered.  We expect additional guidance in the coming days and will do our best to keep this information updated.  

Otherwise, the best source of information is your trusted lawyer, accountant, or banker.





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