• O'Neill Tran Law

Paycheck Protection Program

Updated: Apr 6

CARES ACT

Sections 1102 and 1106


Who is Eligible

  • Businesses in operation on February 15, 2020 and had employees or independent contractors.

  • Businesses/non-profits with fewer than 500 employees are the primary candidates;

  • Self-employed individuals, independent contractors, and sole proprietors may be eligible with satisfactory documentation

Loan Amount

The lesser of:

  • $10M, or

  • (AA x 2.5) +bb

Non-Seasonal Employers:

AA = the average total monthly payments by the applicant for payroll costs incurred during the 1-year period before the date on which the loan is made.

bb = the outstanding amount of a loan under SBA Business Loan Programs account that was made during the period beginning January 31, 2020 and ending on the date which covered loans are made available to be refinanced under the covered loan.


Seasonal Employers

AA = the average total monthly payments for payroll shall be the 12-week period beginning February 15, 2019, or at the election of the recipient, March 1, 2019 and ending June 30, 2019.

bb = the outstanding amount of a loan under SBA Business Loan Programs account that was made during the period beginning January 31, 2020 and ending on the date which covered loans are made available to be refinanced under the covered loan.

Alternate time period is used for those who weren’t in business from February 15, 2019 through June 30, 2019.


Loan Terms

  • 10 year terms

  • Interest rate not to exceed 4%.

  • payment deferral for a period of not less than 6 months and not more than a year.

  • If remaining balance, will have maximum maturity of 10 years from the date on which the borrow applies for loan forgiveness.

  • Waiver of personal guarantee

  • Waiver of collateral


Loan Use

  • Payroll costs, costs related to continuation of healthcare benefits, and insurance premiums;

  • Employee salaries (for salaries under $100,000), commissions, or similar compensations;

  • Payments of interest on any mortgage obligation (shall not include any prepayment of or payment of principal on a mortgage obligation;

  • Rent, utilities, and interest on any other debt obligations incurred before the covered period.


Loan Forgiveness

  • Covered period = 8 week period beginning on the date of the origination of a covered loan.

  • Expected forgiveness amount – amount of principal that a lender reasonably expects a borrower to expend during the covered period on:

o Payroll costs;

o Payments of interest on covered mortgage obligation (incurred before February 15, 2020)

o Payments on any covered rent obligation;

o covered utility payments.

  • Amount forgiven shall not exceed principal amount of financing.

  • REDUCTION BASED ON REDUCTION IN NUMBER OF EMPLOYEES:

o Multiply the amount of the loan that was used for eligible uses as listed above by the quotient obtained by dividing:

- average number of full-time employees per month employed during covered period, by

- the average number of full-time employees per month employed between February 15, 2019 and June 30, 2019 OR the average number of full time employees per month employed during the period beginning on January 1, 2020 and ending on February 20, 2020(at recipient’s option).

o Seasonal employer: Multiply the amount of the loan that was used for eligible uses as listed above by the quotient obtained by dividing:

- average number of full-time employees per month employed during covered period, by

- the average number of full-time employees per month employed between February 15, 2019 and June 30, 2019.

o Average number of full-time employees determined by: calculating the average number of full-time equivalent employees for each pay period falling within a month.


  • REDUCTION RELATING TO SALARY AND WAGES:

o Amount of loan forgiveness will be reduced by the amount of any reduction in total salary or wages of any employee during the covered period that is in excess of 25% of the total salary or wages of the employee during the most recent full quarter during which the employee was employed before the covered period.

o Exemptions for re-hires: amount of loan forgiveness shall be determined without regard to reduction in number of full-time employees or reduction in salary during the period beginning on February 15, 2020 and ending April 26, 2020. Not later than June 30, 2020 the applicant has re-hired and reduced the wage reductions.


Necessary Documentation

  • Payroll tax filings reported to the IRS;

  • State income, payroll, and unemployment insurance filings;

  • Documentation on leases, mortgages, and utility payments

  • Standard loan application documents


Application

  • Fill out the application, available here.

  • Apply with an eligible lender, such as:

o SBA-certified lenders

o FDIC-insured banks and credit unions

o Farm Credit Systems institutions

o Other approved lenders (must go through application process)


Should you have any questions regarding the CARES ACT or any other options available for you and your business, please contact O’Neill Tran Law at Katie@oneilltranlaw.com

O’Neill Tran Law assumes no responsibility for the accuracy or timeliness of the information on this website.  This website is for informational purposes only and is not legal advice nor a substitute for legal counsel.  The use of this website does not create an attorney-client relationship.

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You may contact us at info@oneilltranlaw.com.  

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