CARES Act - Payroll Protection Program
During the covered period, in addition to small business concerns, private nonprofit organizations, and small agricultural cooperatives, an eligible entity shall be eligible for a loan made under section 7(b)(2) of the Small Business Act U.S.C. 636(b)(2))
the term ‘‘eligible entity’’ means:
- a business with not more than 500 employees.
- BUSINESS CONCERNS WITH MORE THAN 1 PHYSICAL LOCATION.—During the covered period, any business concern that employs not more than 500 employees per physical location of the business concern and that is assigned a North American Industry Classification System code NAICS) beginning with 72 at the time of disbursal shall be eligible to receive a covered loan.
(B) any individual who operates under a sole proprietorship, with or without employees, or as an independent contractor.
(C) a cooperative with not more than 500 employees.
(D) an ESOP (as defined in section 3 of the Small Business Act (15 U.S.C. 632)) with not more than 500 employees: or
(E) a tribal small business concern, as described in section 31(b)(2)(C) of the Small Business Act (15 U.S.C. 657a(b)(2)(C)), with not more than 500 employees.
MAXIMUM LOAN AMOUNT.—During the covered period, with respect to a covered loan, the maximum loan amount shall be the lesser of the average payroll costs incurred during the 1-year period before the date on which the loan is made times 2.5 or $10,000,000, whichever is less.
Loan maturity - Maximum of 10 years from the date on which the borrower applies for loan forgiveness under that section. Covered Loans will be required to be deferred for 6 months to a maximum 12 months
INTEREST RATE REQUIREMENTS. —A covered loan shall bear an interest rate not to exceed 4 percent.
Fees: All SBA Guaranty Fees normally applicable to the 7a loan will be waived
CERTIFICATION.—As a condition of receiving a 12 loan under this section, a borrower shall certify under terms acceptable to the Secretary that the borrower— (1) does not have an application pending for a loan under section 7(a) of the Small Business Act (15 U.S.C. 636(a)) for the same purpose; and (2) has not received such a loan during the period beginning on February 15, 2020 and ending on December 31, 2020.
LOAN FORGIVENESS.—Borrowers are eligible for loan forgiveness equal to the amount spent by the borrower during an eight-week period after the origination date of the loan on the following items: payroll costs; interest payment on any mortgage incurred prior to February 15, 2020; payment of rent on any lease in force prior to February 15, 2020; and payment on any utility for which service began before February 15, 2020.
- Amounts forgiven may not exceed the principal amount of the loan. Eligible payroll costs do not include compensation to any employee above $100,000 in wages.
- Amounts forgiven will be reduced proportionally by any reduction in employees retained during the eight-week period after the date of the loan as compared to either (i) the period from February 15, 2019 to June 30, 2019 or (ii) the period from January 1, 2020 to February 29, 2020. The borrower can elect the period of time used for the analysis.
- Amounts forgiven will also be reduced by the reduction in pay of any employee beyond twenty-five percent (25%) of their compensation for the most recent full quarter during which the employee was employed.
- Borrowers that re-hire workers previously laid off will not be penalized for having a reduced payroll at the beginning of the period.
- The remaining loan balance of any portion of a loan that is not forgiven will have a maturity of not more than ten (10) years, and a maximum interest rate of four percent (4%)
(1) NONRECOURSE. WAIVER OF PERSONAL GUARANTEE REQUIREMENT. —During the covered period, with respect to a covered loan ‘‘(i) no personal guarantee shall be required for the covered loan unless the loan is used for unauthorized purposes; and ‘‘(ii) no collateral shall be required for the covered loan.
(2) the requirement that an applicant needs to be in business for the 1-year period before the disaster, except that no waiver may be made for a business that was not in operation on February 15, 2020; and
(3) WAIVER OF AFFILIATION RULES. —During the covered period, the provisions applicable to affiliations under section 121.103 of title 13, Code of Federal Regulations, or any successor regulation, are waived with respect to eligibility for a covered loan
(d) APPROVAL AND ABILITY TO REPAY FOR SMALL DOLLAR LOANS. —With respect to a loan made under section 7(b)(2) of the Small Business Act (15 U.S.C. 11 636(b)(2)) in response to COVID–19 during the covered period, the Administrator may
(1) approve an applicant based solely on the credit score of the applicant and shall not require an applicant to submit a tax return or a tax return transcript for such approval; or
(2) use alternative appropriate methods to determine an applicant’s ability to repay.
HOLD HARMLESS.—If a lender has received the documentation required under this section from an eligible recipient attesting that the eligible recipient has accurately verified the payments for payroll costs, payments on covered mortgage obligations, payments on covered lease obligations, or covered utility payments during covered period (1) an enforcement action may not be taken against the lender under section 47(e) of the Small Business Act (15 U.S.C. 657t (e)) relating to loan forgiveness for the payments for payroll costs, payments on covered mortgage obligations, payments on covered lease obligations, or covered utility payments, as the case may be; and (2) the lender shall not be subject to any penalties by the Administrator relating to loan forgiveness for the payments for payroll costs, payments on covered mortgage obligations, payments on covered lease obligations, or covered utility payments, as the case may be.
AUTHORITY TO INCLUDE ADDITIONAL FINANCIAL INSTITUTIONS.—The Department of the Treasury, in consultation with the Administrator, and the Chairman of the Farm Credit Administration shall establish criteria for insured depository institutions, insured credit unions, institutions of the Farm Credit System chartered under 14 the Farm Credit Act of 1971 (12 U.S.C. 2001 et seq.), and other lenders that do not already participate in lending under programs of the Administration, to participate in the paycheck protection program to provide loans under this section until the date on which the national emergency declared by the President under the National Emergencies Act (50 U.S.C. 1601 et seq.) with respect to the Coronavirus Disease 2019 (COVID–19) expires.
ADDITIONAL LENDERS.—The authority to make loans under this paragraph shall be extended to additional lenders determined by the Administrator and the Secretary of the Treasury to have the necessary qualifications to process, close, disburse and service loans made with the guarantee of the Administration.
Delegated Authority: For purposes of making covered loans a lender approved to make loans under this subsection shall be deemed to have been delegated authority by the Administrator to make and approve covered loans, subject to the provisions of this paragraph.
Documentation verifying the number of full time equivalent employees on payroll and pay rates for the periods described in subsection (d), including (A) payroll tax filings reported to the Internal Revenue Service; and (B) State income, payroll, and unemployment insurance filings; (2) documentation, including cancelled checks, payment receipts, transcripts of accounts, or other documents verifying payments on covered mortgage obligations, payments on covered lease obligations, and covered utility payments; (3) a certification from a representative of the eligible recipient authorized to make such certifications that— (A) the documentation presented is true and correct; and (B) the amount for which forgiveness is requested was used to retain employees, make interest payments on a covered mortgage obligation, make payments on a covered rent obligation, or make covered utility payments; and (4) any other documentation the Administrator determines necessary.
SBA Loan Guarantee: The SBA will provide a 100% Guaranty to the participating Lender
REIMBURSEMENT FOR PROCESSING.— IN GENERAL.—The Administrator shall reimburse a lender authorized to make a covered loan at a rate, based on the balance of the financing outstanding at the time of disbursement of the covered loan, of 1) Five (5) percent for loans of not more than $350,000; 2) Three (3) percent for loans between $350,000 and $2,000,000; and 3) One (1) percent for loans of more than $2,000,000. reimbursement shall be made not later days after the disbursement of the covered loan.
PURCHASE OF GUARANTEES.—For purposes of the purchase of the guarantee for a covered loan by the Administrator, amounts which are forgiven under this section shall be treated in accordance with the procedures that are otherwise applicable to a loan guaranteed under section 7(a) of the Small Business Act
**SEC. 1112. SUBSIDY FOR CERTAIN LOAN PAYMENTS. (a) DEFINITION OF COVERED LOAN.—In this section, the term ‘‘covered loan’’ means a loan that is (1) guaranteed by the Administration under(A) section 7(a) of the Small Business Act 17 (15 U.S.C. 636(a)) (i) including a loan made under the Community Advantage Pilot Program of the Administration;…. and It is the sense of Congress that
- all borrowers are adversely affected by COVID-19;
- relief payments by the Administration are appropriate for all borrowers; and
- in addition to the relief provided under this Act, the Administration should encourage lenders to provide payment deferments, when appropriate, and to extend the maturity of covered loans, so as to avoid balloon payments or any requirement for increases in debt payments resulting from deferments provided by lenders during the period of the national emergency declared by the President under the National Emergencies Act (50 U.S.C. 1601 et seq.) with respect to the Coronavirus Disease 2019 (COVID–19). 22
PRINCIPAL AND INTEREST PAYMENTS.
IN GENERAL.—The Administrator shall pay the principal, interest, and any associated fees that are owed on a covered loan in a regular servicing status
- with respect to a covered loan made before the date of enactment of this Act and not on deferment, for the 6-month period beginning with the next payment due on the covered loan;
- with respect to a covered loan made before the date of enactment of this Act and on deferment, for the 6-month period beginning with the next payment due on the covered loan after the deferment period; and
- with respect to a covered loan made during the period beginning on the date of enactment of this Act and ending on the date that is 6 months after such date of enactment, for the 6-month period beginning with the first payment due on the covered loan.
TIMING OF PAYMENT. —The Administrator shall begin making payments under paragraph (1) on a covered loan not later than 30 days after the date on which the first such payment is due.
APPLICATION OF PAYMENT. —Any payment made by the Administrator under paragraph (1) shall be applied to the covered loan such that the borrower is relieved of the obligation to pay that amount.