Posted March 27, 2020
The United States Senate has unanimously passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) and the House of Representatives is expected to approve it today, March 27, 2020. President Trump has indicated that he intends to sign the CARES Act once it reaches his desk.
Although the CARES Act contains numerous provisions, one of the most important for businesses with fewer than 500 employees is Section 1102. Section 1102 allows companies employing fewer than 500 employees (full, part-time, or otherwise), to obtain a Payroll Protection Program Loan (a “PPP Loan”) of up to $10 Million from local Small Business Administration lenders for the covered period of February 15, 2020 through June 30, 2020 through an existing loan guarantee program of the Small Business Act (the “SBA”).
The following entities and individuals may also be eligible for PPP loans:
These PPP Loans allow companies to borrow the lesser of:
“Payroll costs” includes any of the following:
Applicants for PPP Loans do not need to demonstrate that they could not achieve credit elsewhere, fees are waived in their entirety, and interest rates are capped at 4%. Additionally, PPP Loans require neither collateral nor a personal guarantee by the borrower, and lenders are required to defer payments on PPP Loans for between six months and one year. Finally, the CARES Act does not prohibit PPP Loans for applicants who have already received Disaster Loans under the SBA, so long as the loans are not used for duplicative purposes.
PPP loans can be used to repay or refinance existing Disaster Loans, for any authorized purpose under the SBA, as well as for the following:
The portion of PPP Loans used to cover payroll, mortgage, rent or utility costs from February 15, 2020 through June 30, 2020 are eligible for forgiveness, meaning that the borrower will not have to repay that portion of the loan. In order to incentivize the retention of employees at existing salaries, the amount of loan forgiveness is reduced by:
In order to incentivize the rehiring of employees and reversal of any salary reductions, loan forgiveness will be determined without regard to any reductions, if, by June 30, 2020, the loan recipient rehires all laid off employees and fully restores any salary reductions occurring during the period of February 15, 2020 through 30 days after enactment of the CARES Act.
The Firm’s lending and business attorneys have a wealth of experience in handling commercial loans for a variety of different industries. This team is poised and ready to begin the process of obtaining PPP Loans for qualifying companies. Please contact Seth Tipton or Sarah Powell if you have any questions.
Our offices are strategically located throughout New Jersey, Pennsylvania and New York.