The CARES Act provides $350 billion to fund a new loan program within the Small Business Administration's (SBA) 7(a) program known as the Paycheck Protection Program (PPP).
PPP loans would have a 100% federal guarantee with no collateral or personal guarantee required. Borrowers would have to make a good faith certification that the loan is necessary due to economic uncertainty related to COVID‑19, the funds will be used to retain workers and maintain payroll, lease, and utility payments, and they aren't receiving duplicative funds from another SBA program.
Eligible businesses would include those with 500 or fewer employees or that otherwise meet current SBA size standards; self-employed individuals and "gig economy" workers; and certain non‑profits (including 501(c)3 organizations, 501(c)19 veteran organizations, and tribal businesses) with fewer than 500 employees.
Maximum PPP loan amounts would be 250 percent of an employer's monthly payroll, up to a maximum of $10 million.
Loan forgiveness would be available for amounts spent on covered payroll costs and overhead during an 8‑week period after the loan origination date.
Covered payroll costs include salary, wages, and payment of cash tips up to an annual pay rate of $100,000 for an employee; employee group healthcare benefits, including insurance premiums; retirement contributions; and covered leave.
Covered overhead would include interest payments on any mortgage incurred prior to February 15, 2020, rent payments on a lease in force prior to that date, and utility payments for service which began prior to that date.
Loan forgiveness couldn't exceed the principal amount of the loan. Forgiveness amounts would be reduced proportionally by any reduction in employees retained compared to the prior year and reduced by the reduction in pay of any employee beyond 25% of their prior year compensation.
PPP loan amounts not forgiven after one year would be carried forward as an ongoing loan with a maximum term of 10 years, a maximum interest rate of 4%, and the 100% federal loan guarantee would remain in effect.
PPP borrowers that re-hire workers previously laid off during the crisis wouldn't be penalized for having a reduced payroll at the beginning of the loan period.
PPP loan payments could be completely deferred for at least six months but no more than one year.
Loans would be available immediately after the enactment of the CARES Act through more than 800 existing SBA‑certified lenders, including banks, credit unions, and other financial institutions. It would also streamline the process for bringing in new lenders that could participate in the PPP (but not traditional 7(a) loans).
Borrowers with an existing Economic Injury Disaster Loan (EIDL) could apply for PPP payroll assistance, but if it isn't a COVID‑19‑related EIDL loan they wouldn't be able to refinance into the PPP loan. The emergency EIDL grant award of up to $10,000 would be subtracted from the amount forgiven under the PPP.
The SBA would be required to pay all principal, interest, and fees on all existing SBA loan products (excluding PPP loans) to provide relief to small businesses negatively affected by COVID‑19.