On Friday, March 27, President Trump signed the more than $2 trillion coronavirus stimulus bill known as the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law. It is the third phase in a wave of legislation designed to provide relief to businesses and individuals impacted by the coronavirus. Earlier legislation included an $8.3 billion bill to fund vaccine development efforts, as well as the passage of the Families First Coronavirus Response Act to provide expanded paid leave.

The CARES Act amends the current Small Business Act to create a new loan program to help businesses weather the economic hardship resulting from the global COVID-19 pandemic. One of the key provisions of the CARES Act is the Paycheck Protection Program, which provides a business the opportunity to borrow up to two and half times its monthly payroll cost in order to keep employees on the payroll and secure their health benefits. In addition, the Program provides provisions for the entire loan to be forgiven as long the business keeps its workforce employed.

Below are some of the key elements of the Paycheck Protection Program and the Related Loan Forgiveness Provisions:

Eligible Businesses

  • Applies to most businesses under 500 employees, with special provisions for businesses over 500 employees with multiple locations and classified under NAICS code 72
  • 501c(3) nonprofit organizations
  • Must have been in operation on February 15, 2020
  • May have employees or independent contractors

Loan Amount

  • Lesser of:
  • $10 million, or
  • 2.5 times average monthly payroll costs

Payroll Costs

  • Not to exceed $100,000 per person on a pro-rated basis
  • May cover:
  • Salary, wage, commission, tips
  • Vacation, parental, family, medical or sick leave
  • Allowance for dismissal or separation
  • Group health care benefits, including insurance premiums
  • Retirement benefits
  • Payment of state or local tax assessed on the compensation

Allowable Uses of Loan Proceeds

  • Payroll costs and benefits
  • Payments of interest on any covered mortgage obligation
  • Rent
  • Utilities
  • Interest on other debt incurred before the covered period

Good Faith Requirements

  • Business was impacted by COVID-19
  • Funds will be used appropriately, in line with the stipulations defined by the Program
  • Applicant is not concurrently applying for another loan under the Program

Loan Terms

  • Maximum maturity of 10 years
  • Interest rate not to exceed 4 percent
  • No prepayment penalty


  • All or a portion of the amount borrowed is eligible for forgiveness
  • Forgiveness amount is based on the actual costs incurred
  • Forgiveness amount will be reduced proportionally by reduction in employee count or reduction in salary in excess of 25 percent
  • Documentation will be required to support forgiveness
  • Forgiveness payments must be made within 90 days of amount determination

Additional Benefits

  • Nonrecourse
  • Fees will be waived
  • No personal guarantees required
  • No collateral requirements
  • No federal income tax on forgiveness of the loan

The Paycheck Protection Program component of the CARES Act will provided much-needed relief to businesses that are being impacted by this ongoing pandemic. We are committed to helping you as you navigate these changes. Please let us know how we can be of assistance.

We are also regularly updating our COVID-19 Resource Center, which you can access here. If you have any questions about these or any other matters, please do not hesitate to contact your Kreischer Miller professional or any member of our team.

Information contained in this alert should not be construed as the rendering of specific accounting, tax, or other advice. Material may become outdated and anyone using this should research and update to ensure accuracy. In no event will the publisher be liable for any damages, direct, indirect, or consequential, claimed to result from use of the material contained in this alert. Readers are encouraged to consult with their advisors before making any decisions.