CARES Act’s Payroll Protection Program (“PPP”) Loans

Summary of PPP Loan Provisions

Gettry Marcus Crisis Advisory Task Force (“Task Force”) has been advising our clients on the financial resources available through government-backed stimulus packages and disaster loan programs. Our Task Force is also providing tax and other business-related guidance, as well as assisting clients with budgeting and cash flow management, during the heath pandemic.

As most of you are aware, the CARES Act (the “Act”), the third and largest stimulus package, has been signed by the president. In an effort to provide a general understanding of the Act’s PPP loan provisions and how they can potentially benefit our clients, our Task Force has been reviewing information as it becomes available.

A summary of the Act’s PPP loan provisions (SUBJECT TO CHANGE AS ADDITIONAL GUIDELINES ARE MADE AVAILABLE) are as follows:

  • Approximately $350 billion is available for loans to small businesses (less than 500 employees)
  • SBA lenders will be charged with administering the loans
  • The window to borrow is from February 15th to June 30th, 2020 
  • Loans can be used to fund payroll expenses of employees up to $100,000 annually per employee, including associated benefits, as well as rent, utilities, and interest on certain mortgages
  • The above expenses must be incurred in an 8 week period starting with the origination of the loan (the “Covered Period”)
  • Maximum borrowing is $10m per borrower
  • Maximum borrowing ($10m) is capped at 2-1/2 times the borrower’s monthly payroll costs
  • Loans will not require collateral nor personal guarantees, subject to adhering to strict requirements
  • Forgiveness of Loan:
    • If certain staffing and compensation levels are maintained during the Covered Period, the loans will be forgiven
    • Borrowers will have to follow strict guidelines and provide specific documentation
    • Guidelines will be based on meeting certain full-time equivalent employee requirements and certain minimum compensation requirements during the Covered Period
    • Loan forgiveness may not be granted or reduced, if the above guidelines are not met
    • If loan forgiveness is not granted, then the debt will have to be repaid over a 2 year period at 1% interest.
  • Since there is no formal credit underwriting, the turn-around time for approval should be significantly less than for conventional or SBA Disaster Loan financing.

For additional assistance, please contact your Gettry Marcus advisor who will work with our COVID-19 Crisis Advisory Task Force to provide additional assistance regarding PPP loan provisions in the CARES Act, as well as financing available through SBA Disaster Loans.