March 27th, 2020


CARES Act Loan Application Details

CARES Act Summary

The maximum amount of the loan you are able to request is the lesser of:

  • 2.5 times your average monthly payroll in 2019 (salaries in excess of $100,000 cannot be counted)
  • $10,000,000

It is not known what lenders will specifically require for these loans however, having the following reports/documents prepared and available should help:

  • 2019 941’s (Employer’s Quarterly Federal Tax Return)
  • 2019 State Specific Employer’s State Tax Returns—typically for State Unemployment Tax and other local/state required payroll taxes
  • Printed reports of gross payroll amounts (in Quickbooks—Payroll Summary Report)
  • Any other payroll related reports specific to your businesses or state of business

What can the loan be used for?

  • Payroll costs including salaries, wages, commissions, tips, vacation, parental, family, medical, or sick leave, allowance for dismissal or separation.
  • Healthcare benefits including premiums
  • Payment of retirement benefits
  • Payment of state or local tax assessed on the compensation of employees
  • Compensation or income of independent contractor that is wage, commission, income, net earnings from self-employment not to exceed $100,000 in 1 year.
  • PPP loans cannot be used to pay salaries in excess of $100,000.
  • payments of interest on any mortgage obligation (which shall not include any prepayment of or payment of principal on a mortgage obligation)
  • Rent (including rent under a lease agreement)—lease must have been in force prior to February 15, 2020
  • Utilities (including electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020)
  • interest on any other debt obligations that were incurred before February 15, 2020.

Loan Forgiveness

  • 8 weeks of qualified expenses may be forgiven under certain criteria. (The 8 week period begins on the origination date of a covered loan)
  • Qualified expenses include:
    • Payroll costs
    • Any payment of interest on any covered mortgage obligation (which shall not include any prepayment of or payment of principal on a covered mortgage obligation)
    • Any payment on any covered rent obligation
    • Any covered utility payment
  • The amount of loan forgiveness will be reduced if the average number of full-time equivalent employees during the 8 week forgiveness period is less than the average number of FTE employees at either (a) the period February 15, 2019, to June 30, 2019, or (b) the period January 1, 2020, to February 29, 2020. The employer chooses which period to compare. Employers are encouraged to rehire laid-off workers and as a result, employers will not be penalized if they had a reduced payroll at the beginning of the 8 week forgiveness period.
  • To receive full forgiveness employers must keep their employees and pay them at least 75% of their prior-year compensation.

How to apply for Loan Forgiveness

  • Banks and lending institutions will need to release guidelines on what is required to apply for loan forgiveness. The legislation requires the following documentation to be provided to your lender, so starting to keep a record of the following documents will be helpful in applying:
    • Documentation verifying the number of FTE employees on payroll and pay rates including Payroll Tax Filings reported to the IRS (Form 941), State income, payroll, and unemployment insurance filings.
    • Canceled checks, payment receipts or other documents verifying payments on covered mortgage obligations
    • Canceled checks, payment receipts or other documents verifying lease obligations
    • Canceled checks, payment receipts or other documents verifying covered utility payments
  • Lenders will have 60 days after they receive an application for loan forgiveness to issue a decision.
  • Within 30 days of this legislation being signed the Treasury Department will issue more concrete guidelines on loan forgiveness processes.