CARES Act: Paycheck Protection Program Guide

The following information from Lutz and Carr summarizes the Paycheck Protection Program established under the CARES Act, which may apply to many of our grantees and our creative community.

  • Available to small businesses, independent contractors, self-employed individuals and 501(c)(3) nonprofit organizations.
  • Business must have less than 500 employees.
  • Loan amount is lesser of $10,000,000 or 2.5 times the average total monthly payroll costs from the 1 year period before the loan is made. This excludes compensation paid to any one employee over $100,000.
  • Loan maturity is for not more than 10 years.
  • Maximum interest rate is 4%.
  • No personal guaranty or collateral will be required.
  • The Paycheck Protection Program under the Act waives both borrower and lender fees and prepayment penalties.
  • Loan is rewarded to keep workers on payroll and to encourage employers to rehire any employees who have been laid off due to COVID-19 crisis.
  • The loan can be used for payroll costs including salaries, paid sick leave, medical leave, group health care benefits, mortgage interest, rent and utility payments.
  • Eligibility can be determined without going through the SBA’s normal process. 
  • Repayment ability cannot be determined right now, so the lenders will determine if the business is operational on February 15, 2020 and had employees to whom it paid salaries and payroll taxes at that time.
  • Borrowers cannot be receiving duplicative funds from another SBA program.
  • The loan may be forgiven, but a separate application must be filed for loan forgiveness.
  • Loan forgiveness is equal to the amount spent by the borrower during the eight week period following the disbursement of the loan on payroll costs for workers making less than $100,000, rent, interest on mortgage, and utility payments.  
  • Reductions in employment that occurs between February 15, 2020 and April 16, 2020 will be disregarded for purposes of reducing the forgiveness amount as long as the reductions are eliminated by June 30, 2020. 
  • Any amount forgiven will not be considered taxable income. 
  • Applications are filed with an SBA-approved lender. 

 
Additional guidance from the SBA regarding how to apply for the loans and how to find and SBA lender is expected in the coming days, but here is what you can do now:

  • Go to the SBA website https://www.sba.gov/funding-programs/disaster-assistance where you can apply for the Economic Injury Disaster Loan (EIDL) and be matched with a lender. 
  • Request an advance grant of $10,000 three days after applying for the loan.
  • If the business is denied the loan, the advance of $10,000 will not have to be repaid as long as the payments are used for business expenses such payroll and rent payments.

While the details are being finalized, other sources of funding include the following:
           NYC Employee Retention Grants
           NYC Business Continuity Loans
           NYS Emergency Loans
           SBA Disaster Relief Loans
           NYC COVID-19 Response and Impact Fund - loans and grants for nonprofit organizations

An additional link for summary of information from the US Chamber of Commerce is below: 

https://www.uschamber.com/sites/default/files/023595_comm_corona_virus_smallbiz_loan_final_revised.pdf