The CARES Act includes a program, called the Paycheck Protection Program or PPP, to provide cash flow assistance to small businesses with 500 or fewer employees, including sole proprietors, independent contractors, and self-employed persons. Small businesses with more than 500 employees may also be eligible if they satisfy certain tests established by the Small Business Administration (more info here and here). Among other things, the business needs to certify that current economic uncertainty makes the loan request necessary to support their ongoing operations. Borrowers need to make that certification in good faith, taking into account their current business activity and their ability to access other sources of liquidity to support their operations.

Some landlords may not be eligible for the PPP if they are considered passive businesses. The cash flow assistance for this program comes in the form of a loan of up to 2.5 times average monthly payroll costs, not to exceed $10 million, which can be fully forgiven if the funds are used for specified costs and if employees and employee salaries are maintained. Also, payments on those loans can be deferred for at least 6 months and up to one year and may be subject to a maximum 1% interest rate.

In early June, Congress enacted a law that makes changes to the PPP to give business owners more flexibility in using the funds they receive under the program. That law, entitled the Paycheck Protection Program Flexibility Act, (1) extends the period that loan recipients have to use the loan from 8 to 24 weeks, (2) reduces the percentage of a forgivable loan that must be put toward payroll from 75% to 60%, and (3) extends the amount of time small businesses have to pay back loans from 2 to 5 years.

Interested employers are encouraged to contact their bank to see if they are participating or contact the SBA to find a participating bank. Large banks are only processing applications for existing customers. These loans are “first come, first serve,” with a limited budget.

The application form for the PPP can be found here. The deadline to apply for this program has been extended to August 8.

To obtain forgiveness of the loan, borrowers will need to file another application, which is available here.