Paycheck Protection Program Provisions

New Coronavirus Government Loans to Maintain, Restore or Expand Your Workforce

NOTE: Early indications are that the funding for these loans – even as extended under the new coronavirus stimulus package approved by Congress in December 2020 – will be grossly inadequate for the degree of financial dislocation that many small and midsize businesses in the United States are suffering. If you find this applies to your business – or your client’s business – click the link below to use our online screening tool to see if you may be eligible for one of several federal and state tax incentives that can boost your cash flow without needing to be repaid – and can often do so faster than this often cumbersome federal loan process.

For other solutions to business cash flow needs, visit

The $2.2T Coronavirus Aid, Relief and Economic Security (CARES) Act included the $349B Paycheck Protection Program (PPP) for U.S. small businesses while the coronavirus stimulus package of December 2020 renewed and extended the PPP, allowed business expenses paid with PPP loan funds to be tax deductible expenses and allows employers who receive Paycheck Protection Program loans to still qualify for the Employee Retention Tax Credit (ERTC) with respect to wages that are not paid for with forgiven PPP proceeds (this was not permitted under the prior CARES Act provisions)

This unprecedented stimulus program includes the following key components and requirements:

  • Applies to all businesses with up to 500 employees and paying salaries & payroll tax on 2/15/20;
  • Increases pool of bank and credit union lenders with government-guaranteed SBA 7(a) loans;
  • Expedited loan processes – talk to your company’s current bank or credit union ASAP;
  • Requires good faith attestation that uncertainty of current economic conditions makes the loan request necessary to support ongoing operations;
  • Loans of up to 10 years duration available until 6/30/20 with…
  • Initial interest rate of 1% (can go up to 4% later), loan fees waived;
  • Principal and interest payments deferred for 6-12 months;
  • No collateral or personal guarantees;
  • Ability to borrow elsewhere waived;
  • 100% government guarantee effectively waives ability-to-repay requirement;
  • Portion of loan may convert to a tax-free grant if eligible employees are retained until at least 6/30/20 (with no salary or wage reduction more than 25% for employees paid under $100k annually);
  • Loan amount maximum is lesser of:
    • Prior year average monthly payroll times 2.5 (or 10 weeks of payroll costs), health and retirement benefits, rent, utilities and interest on debt obligations (including mortgages), or
    • $10M;
  • Forgiveness amount is based on first 24 weeks of eligible costs after loan issuance; and
  • Forgiven amount will not be treated as taxable income.

This loan forgiveness component makes these business loans especially attractive amid the current economic uncertainty. However, the amount forgiven is limited to eight weeks of payroll costs (vs. a total of ten weeks of eligible payroll costs in loan), plus other eligible costs.

Therefore, it’s best viewed as a grant within a larger loan, with 80%+ eligible for forgiveness. However, total loan amount can be forgiven if first 8 weeks of post-loan payroll exceeds pre-loan average payroll up to loan amount (incentive to expand, and not just restore or maintain, workforce).

Some caveats apply, of course, including the following…

  • Non-U.S. resident employees are excluded;
  • Eligible payroll costs are capped at $100,000 (excludes salary/wages over $100,000/year);
  • Interest is not forgiven; and
  • Businesses should confirm existing debt doesn’t preclude or limit taking on additional debt.

It’s important for businesses applying for these loans to do some quick cash flow planning to determine:

  • How loan proceeds will be used – they must be used for payroll & other eligible costs (including insurance), but precisely how & whether salary reductions are necessary should be considered;
  • Whether furloughed or laid off employees are available for rehire (without penalty for loan and loan forgiveness purposes – meaning they’ll still qualify for loan forgiveness purposes);
  • Loan repayment capability – with and without forgiveness – given current debt requirements (note that payments and interest on current SBA loans are deferred for 6 months);
  • Potential cash flow gaps and ways to remediate them; and – beyond cash flow…
  • How underutilized employees can add more customer value to accelerate return to normal business operations and increase customer loyalty and retention.

For other solutions to business cash flow needs, visit EmergencyBusinessRelief.