CARES Act – Do you Qualify for the Paycheck Protection Program?

The U.S. Treasury and Small Business Administration issued further guidance this week to clarify what businesses qualify for the new Payment Protection Program authorized under the CARES Act.

Small businesses and eligible nonprofit organizations, Veterans organizations, and Tribal businesses described in the Small Business Act, as well as individuals who are self-employed or are independent contractors, are eligible if they also meet program size standards.

Under this program:

  • Eligible recipients may qualify for a loan up to $10 million determined by 8 weeks of prior average payroll plus an additional 25% of that amount.
  • Loan payments will be deferred for six months.
  • If you maintain your workforce, SBA will forgive the portion of the loan proceeds that are used to cover the first 8 weeks of payroll and certain other expenses following loan origination.

Guidance released on April 6, 2020 clarifies what constitutes a “small business” for purposes of the program.

The guidance states:

  • “a business is eligible for a PPP loan if the business has 500 or fewer employees whose principal place of residence is in the United States, or the business meets the SBA employee-based size standards for the industry in which it operates.
  • “Small business concerns can be eligible borrowers even if they have more than 500 employees, as long as they satisfy the existing statutory and regulatory definition of a “small business concern” under section 3 of the Small Business Act, 15 U.S.C. 632. A business can qualify if it meets the SBA employee-based or revenue-based size standard corresponding to its primary industry. Go to for the industry size standards.”
  • “a business can qualify for the Paycheck Protection Program as a small business concern if it met both tests in SBA’s “alternative size standard” as of March 27, 2020: (1) maximum tangible net worth of the business is not more than $15 million; and (2) the average net income after Federal income taxes (excluding any carry-over losses) of the business for the two full fiscal years before the date of the application is not more than $5 million.”

The guidance further addresses questions related to affiliated businesses, seasonal fluctuations in workforce, relationship with independent contractors, and how to calculate payroll costs.

Please review the guidance carefully and consult your tax advisor, banker, and/or attorney if you have specific questions.  We recommend that you proactively submit your SBA PPP application. The program will be oversubscribed and loans are being funded on a first come, first serve basis.

Congress is currently negotiating a fourth federal stimulus package that may include additional funding for the Payment Protection Program.



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