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  • Max Lummis, CPA, CVA, CFE

Paycheck Protection Program - Lifelines up to $10 Million for Small Businesses

President Trump signed the "Coronavirus Aid, Relief, and Economic Security Act" (the CARES Act) on March 27, 2020. Among other provisions, the legislation authorizes $349 billion for the Paycheck Protection Program (PPP) designed to help employers maintain their workforce during the Coronavirus outbreak. CARES expands the SBA's Disaster Loan Program by offering potentially forgivable loans to small businesses and 501(c)(3) organizations. Qualifying businesses must have been in operation prior to Feb 15, 2020, with 500 or less total contractors + salaried employees (1099 and W2).

PPP loans have the following terms and conditions:

• Total Annual Payroll Costs / 12 x 2.5 = Total Loan Amount (annual payroll per person may not exceed $100,000)

• Maximum of 4.00% fixed interest rate

• No personal guarantee

• Up to $10 million maximum loan amount

• No payments for first 6 - 12 months

• 10-year term

• Up to 100% of the principal amount may be forgiven (based on certain accounting calculations)

Owners should note that not all approved loan uses are eligible for forgiveness.

While loans will require borrowers to make certain "good faith" certifications, it is unclear what additional underwriting documentation will be required. Initially, loans will be disbursed through the existing SBA 7(a) bank network (approximately 1,800 lenders nationally), but the program will likely expand. Here is a list of the 100 most active SBA 7(a) lenders in 2019.

While PPP is great news for business owners, expect delays. A disbursement program of this magnitude needs ample runway to get airborne. To be sure, our fellow Americans will work tirelessly to process applications and send money where it is badly needed. More to come - stay well and breath deep.

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