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  • Kirnesh Rathore

CARES Act: Paycheck Protection Program (PPP) SBA Loan.

Congress has identified that payroll is the most important expense for businesses in these testing times and that is the reason why Paycheck Protection Program has been enacted as part of the CARES Act that was signed into law due to the Coronavirus (COVID-19) outbreak.

The program has authorized the Small Business Administration (SBA) to guarantee $349 billion in new loans to eligible businesses and nonprofits affected by coronavirus/COVID-19. Such loans may also qualify for tax-free loan forgiveness if 75% of the loans proceeds are used for payroll and balance is used for rent,mortgage and utilities.

Applicants must apply for the loans before the PPP expiration date of June 30, 2020 or until the $349 billion is available.



Business owners can reach out to their tax advisors to help them navigate through the requirements to secure the PPP loans.


Benefits of PPP loans:

· Loans are available at 1% interest rates for all borrowers.

· No personal guarantee or collateral is required. Loan guaranteed by SBA.

· Loans are non-recourse with respect to shareholders, members, and partners as long as proceeds are used in accordance with the loan terms.

· No fees for borrowers.

· Loan payments are deferred for six months (interest will be accrued).

· Loans mature in two years.

· Not contingent on the borrower's creditworthiness (but delinquency on other open SBA loans.(Past defaulters might be disqualified)


Eligible Recipients of PPP Loans: PPP loans may only be made to "eligible recipients."

A small business of any type--S Corp, C Corp, LLC, sole proprietorship or independent contractor--with fewer than 500 employees qualifies

Eligible recipients must have been in operation on February 15, 2020, and either paid salaries/wages to employees (with respect to which payroll taxes were paid) or paid independent contractors, as reported on a Form 1099-MISC

Eligible recipients must either have 500 or fewer employees whose principal place of residence is in the United States.

(1) Any business.

(2) Nonprofit & veterans organizations exempt from tax under Code Sec. 501(c)(3) & 501(c)(19)

(3) Tribal business concerns (15 U.S.C. 636(a)(36)(A); SBA-2020-0015, .


INELIGIBLE business and organizations for PPP loans by the SBA's interim final rules:

(1) Household employers (i.e., individuals who employ household employees such as nannies or housekeepers);

(2) Those engaged in any illegal activity under federal, state, or local law;

(3) Any business with 20-percent-or-more owner who is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony within the last five years; or

(4) Any individual, organization, business, or business with any owner who/that has ever obtained a direct or guaranteed loan from SBA or any other federal agency that is currently delinquent or has defaulted within the last seven years and caused a loss to the government.

How to Apply for a Loan

To receive a PPP loan, an authorized representative of the borrower needs to complete

SBA Form 2483: Paycheck Protection Program Borrower Application Form, and submit it to the borrower's SBA participating lender.


Please stay safe and remember we are all in it together and this too shall pass.

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