Congress Set to Pass CARES Act Amendment Increasing Paycheck Protection Program Funding; Small Business Administration Issues New Guidance Regarding Program
Congress is set to pass the Paycheck Protection Program and Health Care Enhancement Act,FN1 amending the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), to make additional funds available for the Paycheck Protection Program (“PPP”).FN2 The legislation provides an additional $484 billion to be allocated as follows:
310 billion in new funds for the PPP, which provides loans to small businesses to spend on wages, benefits, rent and utilities. $60 billion is specifically set aside for small lenders, community banks and credit unions, aimed to provide access to small businesses who may not have established relationships with big banks;FN3
$75 billion in grants to hospitals and health care providers treating COVID-19 patients;FN4 and
$25 billion to bolster the development, administration and support of widespread COVID-19 testing, which includes an allocation of funds for the development of rapid tests for use by employers and other entities.FN5
On Thursday, April 23, 2020 the Small Business Administration (“SBA”) published additional guidance in the form of Frequently Asked Questions (“FAQs”) to address questions from borrowers and lenders concerning the PPP’s implementation.FN6 The FAQs clarify, among other things, that:
The CARES Act exclusion of payroll costs of any employee compensation in excess of an annual salary of $100,000 only applies to cash compensation, and not to non-cash benefits such as employer contributions to retirement plans, health care coverage and insurance premiums, or the payment of state and local taxes assessed on compensation of employees;
PPP loans cover payroll costs, including costs for employee vacation, parental, family, medical and sick leave, but excludes qualified sick and family leave wages covered by the Families First Coronavirus Response Act;
Borrowers may calculate their aggregate payroll costs using data from the previous 12 months or from calendar year 2019. An applicant that was not in business from February 15, 2019 to June 30, 2019 may use the average monthly payroll costs for the period January 1, 2020 through February 29, 2020;
Amounts that a small business applicant paid to independent contractors or sole proprietors must be excluded from payroll costs; and
For franchise brands listed on the SBA Franchise Directory, each of its franchisees that meet the applicable size standards are eligible to apply for a PPP loan. Each franchisee is limited to one PPP loan of up to $10 million.
Takeaway
Small business employers are encouraged to closely monitor newly passed legislation and loan application periods to enhance their chance to obtain a PPP loan, which is provided on a first-come-first-served basis. The first round of funds available for the PPP were exhausted last week,FN7 and any newly available funds may go just as quickly. Please contact the attorneys at Campbell Litigation for guidance regarding eligibility and suitability for this program.
Footnotes:
FN1: See Paycheck Protection Program and Health Care Enhancement Act, H.R. ____, https://assets.documentcloud.org/documents/6845673/Senate-2-21-Coronavirus-Relief-Bill.pdf
FN2: See our previous post, Cares Act and the Paycheck Protection Program, published on April 9, 2020, https://www.rockymountainemployersblog.com/blog/2020/4/9/cares-act-and-the-paycheck-protection-program
FN3: See H.R. ____Section 101(d).
FN4: See H.R. ____, Division B, p. 7.
FN5: See H.R. ____, Division B, p. 10-11.
FN6: See Paycheck Protection Program Loans Frequently Asked Questions, https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf
FN7: Thomas Franck and Kate Rogers, Small business rescue loan program hits $349 billion limit and is now out of money, CNBC (April 16, 2020), https://www.cnbc.com/2020/04/16/small-business-rescue-loan-program-hits-349-billion-limit-and-is-now-out-of-money.html