The Coronavirus Aid, Relief and Economic Security (CARES) Act allocated $350 billion to help small businesses keep workers employed amid the pandemic and economic downturn. Known as the Paycheck Protection Program, the initiative provides 100% federally guaranteed loans to small businesses who maintain their payroll during this emergency.

Importantly, these loans may be forgiven if borrowers maintain their payrolls during the crisis or restore their payrolls afterward.

The administration soon will release more details including the list of lenders offering loans under the program. In the meantime, the U.S. Chamber of Commerce has issued this guide to help small businesses and self-employed individuals prepare to file for a loan.

This is part three of four.

One of your main questions might be…How Much Can I Borrow?

The short answer is Loans can be up to 2.5 x the borrower’s average monthly payroll costs, not to exceed $10 million.

Payroll costs that are included:

  1. For Employers: The sum of payments of any compensation with respect to employees that is a:
    • salary, wage, commission or similar compensation
    • payment of cash tip or equivalent
    • payment for vacation, parental, family, medical or sick leave
    • allowance for dismissal or separation
    • payment required for the provisions of group health care benefits including insurance premiums
    • payment of any retirement benefit
    • payment of state or local tax assessed on the compensation of the employee
  2. For sole proprietors, independent contractors and self-employed individuals: The sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is an amount that is not more than $100k in one year as pro-rated for the covered period.

Payroll costs that are excluded:

  1. Compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the period February 15 to June 30, 2020.
  2. Payroll taxes, railroad retirement taxes and income taxes.
  3. Any compensation of an employee whose principal place of residence is outside of the United States.
  4. Qualified sick leave wages for which a credit is allowed under section 7001 of the Families First Coronavirus Respons Act (Public Law 116-5 127); or qualified family leave wages for which a credit is allowed under section 7003 of the Families First Coronavirus Response Act.