CARES Act, Paycheck Protection Loan Summary and Common Questions

About the SBA 7(a) Paycheck Protection Loan Program

The Paycheck Protection Loan is to be used for expenses (detailed below) for the period February 15 – June 30, 2020. This is a first-come-first-serve program. There are over 30 Million small businesses in need of funds. Not everyone will receive this money.

The “$10,000 Loan” that everyone appears to be referring to. This loan program is different from the SBA Economic Injury Disaster Loan Program. If you are interested in the SBA Economic Disaster Loan, click here for more information including where to complete the application.

Paycheck Protection Loan Bank Portals

1. Chase
2. Bank of America
3. Mid Penn Bank – FDIC insured and they have the application ready to complete! UPDATE 4/1/20 – we are learning that this application is more of a pre-qualification vs. application. We still advise using your current banker/lender to manage this process.
4. Silicon Valley Bank (SVB)
5. Huntington Bank – #1 SBA lender
6. Signature Bank
7. Wintrust
8. US Bank – this includes the link to start the application.

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Commonly Asked Questions about the Federal Paycheck Loan Protection Program

• Who Will Provide the Loans? – The loans will be administered by banks and other SBA lenders.
• Who is Eligible for the Loans? – Small businesses (less than 500 employees), 501(c)(3) nonprofit, sole-proprietors, independent contractors, and other self-employed individuals.
• How Big Will the Loans Be? – We understand the loans will be up to $10 million and will be granted based on how much the company has paid its employees between January 1 and February 29. The loan amount will be the lesser of (1) $10 million and (2) 2.5 times the average monthly payroll costs for the one-year period before the date the loan is made. If your business is seasonal, special rules may apply.
• UPDATED 4/1/20 – Do member draws, distributions or guarantee payments get included in the payroll calculation? Very good question. We asked two banks and they provided us two answers – one said NO and the other said YES, but both said its a grey area. We suggest ask your banker for more information.
• What Will the Interest Payments be on the Loans? – the interest rate will be 1.0%. UPDATED 4/5/20
• What can I use the funds for? – The loan can be used for eligible payroll (excludes compensation in excess of $100,000, paid sick or medical leave, insurance premiums), interest paid on a mortgage, rent, or utility bills.
• What is the Term of the Loan? – Up to 10 years.
• Do I need to make any certifications to the SBA/lenders? Yes, eligible borrowers will be required to make a good faith certification that the loan is necessary due to the uncertainty of current economic conditions caused by COVID-19; they will use the funds to retain workers and maintain payroll, lease, and utility payments.
• Are Deferment of Payments Available? – Payment of principal and interest will be deferred from between six months to one year if the loan is not otherwise forgiven.
• Will Small Businesses be able to have their COVID-19 Loans Forgiven? – A small business that uses its SBA loan funds for the approved purpose of the loan and maintains the average size of its full-time workforce (at the time it received the loan) may be eligible for loan forgiveness. The principal of the loan, or the amount borrowed, would be forgiven, and only the interest would need to be repaid. Update – 3/31/20 – a bank has told us that you will need to provide them with your payroll and expense statements 8 10 weeks after the loan origination date. Failure to do so will mean your loan will not be forgiven.
• Are the forgivable loans taxable? – No, forgiveness amounts are excluded from taxable income.
• Do independent contractors count as employees for purposes of PPP loan forgiveness? – No, independent contractors have the ability to apply for a PPP loan on their own so they do not count for purposes of a borrower’s PPP loan forgiveness.
• Where to Get the Loans? – Similar to the SBA 7 (a) loan program, borrows will obtain loans directly from banks and lenders that are enrolled in the SBA 7(a) program and the loans will be guaranteed by the SBA.
• What are the limitations on the SBA Loans? – A business that has received a SBA Program loan is NOT eligible for the Employee Retention Credit.
• Are Personal Guarantees or Collateral required? – During the covered period, no personal guarantees or collateral are required. The SBA will have no recourse against any individuals shareholder, member or partner of any borrower for non-payment of a loan except to the extent any loan proceeds are used for unauthorized purposes.
• What are the Fees? – Fees will be waived.
• What if I applied for, or received an Economic Injury Disaster Loan related to COVID-19 before the Paycheck Protection Program became available, will I be able to refinance into a PPP loan? – Yes, if you received another loan (listed above) related to COVID-19 between January 31, 2020 and the date at which the PPP becomes available, you would be able to refinance the existing loan into the PPP loan. However, any portion that you received from the existing loan would be reduced from the PPP loan. So if you received a $5,000 emergency grant, that amount would be subtracted from the amount forgiven under PPP.