On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The large stimulus package apportioned $349 Billion for the Small Business Association and created a new SBA 7(a) loan program called the “Paycheck Protection Program.” The Paycheck Protection Program provides for loans of up to 2.5 times the borrower’s average monthly payroll costs, not to exceed $10 million, and may be used for qualified payroll costs, rent, utilities, interest on mortgage and other debt payments. The loans issued under this program can be made to businesses which meet the program’s relaxed eligibility requirements and must be disbursed by June 30, 2020.  The loans are 100% guaranteed by the SBA and capped at a 4% interest rate with no collateral or personal guaranty requirements. The SBA is required to issue regulations to implement the Paycheck Protection Program within 15 days after enactment of the Act.

Who is eligible to borrow under the new program?

  • A small business with fewer than 500 employees.
  • A small business that otherwise meets the SBA’s size standards set by existing regulations.
  • A 501(c)(3) with fewer than 500 employees
  • If the business is in the accommodation and food services sector (NAICS 72), the 500-employee rule is applied on a per physical location basis.
  • If the business is operating as a franchise or receive financial assistance from an approved Small Business Investment Company the normal affiliation rules do not apply.

Who can issue loans under the Payment Protection Program?

  • SBA Qualified Lenders under section 7(a).
  • Insured depository institutions.
  • Insured credit unions.
  • Additional lenders which the Administrator and the Secretary of the Treasury determine to have the necessary qualifications to process, close, disburse, and service loans made with the guarantee of the Administration.

Paycheck Protection Program

For more information on these proposed regulations and the changes Compliance Systems will be making, visit our Community Lounge Regulatory and Industry Announcements page.