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CARES ACT PART I: Your Guide to the Paycheck Protection Program

Posted: 04/07/2020 | Author: Terry M Cannon, Esq. for Creatives On Call | Tags: Thought Leadership

CARES ACT PART I: Your Guide to the Paycheck Protection Program

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In late March 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) became law in the United States. The CARES Act includes several programs that seek to aid all aspects of the economy with provisions including cash payments to individuals, expanded unemployment eligibility and additional money from the federal government, temporary student loan relief, and emergency grants. 

Another program created by the CARES Act is the Paycheck Protection Program (PPP). PPP loans are FORGIVABLE LOANS which allow small businesses to continue paying employees rather than resorting to layoffs or furloughs. These loans are available to all businesses – including nonprofits, veterans organizations, Tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors - with 500 or fewer employees. 

Small businesses with fewer than 500 employees may apply now, and starting April 10, 2020, independent contractors and self-employed individuals may begin applying. 

NOTE: Do not confuse this program with the SBA Economic Injury Disaster Loan discussed in a previous post here. The Paycheck Protection Program is a separate loan and you may be eligible for both programs. You may also be able to benefit from expanded paid leave discussed here

The Nuts & Bolts of Forgiveness:

This loan will be forgiven as long as the recipient uses the funds to cover only payroll costs (including benefits), mortgage interest, rent, and utility costs over the 8 week period after the loan is made; and employee and compensation levels must be maintained (no layoffs, salary cuts, or unpaid furloughs). Mortgage, rent, and utility services must have been in effect before February 15, 2020. 

Loan forgiveness is not automatic! You will have to submit a forgiveness request directly to the loans servicer. The request will include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. The lender must make a decision on the forgiveness within 60 days. 

It is currently anticipated that non-payroll costs may not exceed 25% of the forgiven amount. 

What if I already decreased salaries, furloughed, or laid off employees? 

You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020. 

The Details of the Loan:

• Loan amounts will be based on two months of the average monthly payroll costs from the last year plus 25%, up to $10,000,000.

• If a business's monthly payroll is $40,000, it will be eligible for up to $100,000 ($40,000 x 2 = $80,000; plus 25% of $80,000 = $20,000). 

• Interest rate is fixed at 1.00%. All payments are deferred for six months and will be due in two years. There are no pre-payment penalties, personal guarantees or collateral required. 

• Payroll costs include: Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee); employee benefits including vacation, sick leave, healthcare, retirement, payroll taxes, etc.   

• For a sole proprietor or independent contractor, payroll costs includes wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee. 

How to Apply:

Just contact your bank or credit union and ask if they are offering PPP loans. 

You will need to complete the Paycheck Protection Program loan application and submit the application with the required documentation to an approved lender that is available to process your application by June 30, 2020. The application is available here.

It is highly recommended applications be submitted ASAP. While applications will be accepted through June, funds are limited and lenders need time to process the loan. 


Further questions about how this relates to Creatives On Call? Reach out to your Recruiter or Client Services contact, and we'd be happy to help you out. Check out our Facebook channel and LinkedIn account for more updates and helpful resources, daily. For more remote resources now, check out our Resource List for Companies, our Resource List for Creatives and our Resource List for Parents during this work from home time.

The information provided in this post does not constitute legal advice nor does it create an attorney-client relationship. If you need legal advice, call an attorney. Terry M Cannon, Esq. is a practicing lawyer for a local law firm. He graduated from University of Cincinnati Law and is a member of the Kentucky Bar Association. 

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