News & Events

CARES Act Authorizes Paycheck Protection Loan Program

by | Apr 7, 2020 | Banking Law, Business Law, Employment Law, Hoy, Timothy A

Employer Signing Payroll Check

With businesses all over the U.S. facing financial uncertainty in light of mandatory shut-down orders arising out of the COVID-19 pandemic, the U.S. Federal Government has passed sweeping legislation intended to protect businesses and individuals from the fallout related to this financial uncertainty. Known as the CARES Act, it provides, among other protections, for loans backed by the U.S. Small Business Administration to be issued to eligible borrowers under the Paycheck Protection Program. These loans, if used for the permitted purposes under the CARES Act, are subject to forgiveness by the eligible lender making such loan.

Tim Hoy ( (717) 231-5262) and Melanie Vanderau ( (717) 231-5258) are available to advise you on a variety of concerns related to the Paycheck Protection Loan Program, including, borrower eligibility, determining the maximum amount of your loan (including what constitutes “payroll costs”), participating Lenders, permissible use of the Loan proceeds, and process to obtain forgiveness.

Loan Terms:

Eligible Borrowers include:

  • Business with 500 or fewer U.S. Resident employees;
  • Subject to certain exceptions, Business eligible for SBA Loans generally, including sole proprietorships;
  • Certain tax-exempt nonprofit organization described in Section 501(c)(3) of the Internal Revenue Code, including churches;
  • Businesses that were in operation on February 15, 2020;
  • Businesses that either had employees for whom it paid salaries and payroll taxes, or paid independent contractors, as reported on a Form 1099-MISC;
  • Loan Amount is up to the lesser of (i) $10 million or (ii) 2.5x of the average monthly payroll cost in 2019.
  • 1.00% interest and a two year maturity;
  • No collateral required and no guarantees necessary;
  • No up-front fees payable by the Borrower to the eligible Lender;
  • Payment deferral for six (6) months;
  • Only one paycheck protection loan is available to any eligible Borrower;
  • Principal and accrued interest are eligible for forgiveness, if used in accordance with the CARES Act.

Forgivable Uses:

  • Payroll costs and payments of mortgage interest, rent, and utilities;
  • Non-Payroll costs are limited to 25% of the amount forgiven.

Paycheck Protection Program Loans are on a first-come, first-served basis.

Eligible Lenders began accepting applications from small businesses and sole proprietorships on Friday April 3rd and will accept applications from independent contractors and self-employed individuals starting on Friday April 10th. If you have unfortunately had to furlough or lay off staff, the CARES Act does provide an opportunity to rehire during the month of April and to use Paycheck Protection Program loan proceeds to restore the wages of furloughed or laid off staff.

Talk to us today about how you can participate in this program.