CARES ACT – Paycheck Protection Program
The most important part of the CARES Act that will apply to your business is the Paycheck Protection Program (section 1102 p. 9)
What is it?
It’s a forgivable loan (basically a grant) for you to retain employees.
Businesses with less than 500 employees are eligible for this.
It’s designed to cover payroll and overhead costs for eight weeks.
The maximum amount is up to 2.5x of an employer’s average monthly payroll costs Payroll costs include salary, retirement contributions and benefits.
Note: any salary amount above $100,000 is excluded from the loan calculation.
Ex: Your monthly payroll costs are $100,000 = eligible for up to $250,000
No collateral is needed to apply.
Good faith certification the loan is needed due to COVID-19 circumstances and will be used to maintain payroll. (basically everyone is eligible)
What expenses can the loan be used for?
- Payroll & Benefits
- Rent & Utilities
- Interest on current debt
How is it forgiven?
After eight weeks following the loan, add up the costs for the eligible expenses (payroll, rent, utilities, interest)
- Keep detailed records – they will be needed to prove forgiveness eligibility.
If these costs exceed the loan amount, the loan can be forgiven – essentially turning into a grant.
If you made reductions to you team, your loan forgiveness will reduce by the same rate as the percentage of the reduction.
We wait for guidance in the first week of April.