CARES Act – Paycheck Protection Loan Program

The CARCost Seg2ES Act that has been passed by the Senate contains a Paycheck Protection Loan Program through the SBA.  The program offers a maximum loan of the lessor of your monthly average Payroll Costs over the twelve months prior to the loan multiplied by 2.5 or $10,000,000.  Basically, the maximum loan under this program is 2 1/2 months of your total Payroll Costs not to exceed $10,000,000.  They defined Payroll Costs to include salary, wages, commissions, vacation pay, leave pay, severance, health care benefits (including health insurance premiums), retirement benefits, and state & local payroll taxes.

The loan would carry a maximum interest rate of 4% with a maximum term of 10 years.  There is a payment deferral of both principal and interest for at least 6 months, but not to exceed 1 year.  There is no prepayment penalty, the loan is non-recourse with no personal guarantee required, and no collateral needed.

It also appears that the loan fees would be covered and reimbursed by the SBA.  The loan proceeds are meant to be used for payroll costs, healthcare, rent, and utilities to keep the business operating and it’s employees employed.

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