The CARES Act

The CARES Act, signed into law by the President on March 27, 2020, included a program to provide immediate cash flow relief to small businesses which are suffering due to the coronavirus pandemic (the Paycheck Protection Program).  The relief was provided through loans intended to bridge an employer’s future, short-term cash flow demands through June 30, 2020, which has been extended to December 31, 2020 following the June 5th passage of the Paycheck Protection Flexibility Act (PPP Flexibility Act).  In return for an employer’s general continued employment of workers and sustained wage levels through the covered period (the earlier of 24 weeks from loan origination or December 31, 2020) and compliance with the updated expenditure rules, the loan is eligible for forgiveness.

The Paycheck Protection Program is an approximate $659 billion federal appropriation designed to provide that cash-flow bridge.  Through this program, small businesses (generally, those with no more than 500 employees) may apply for a federal loan to fund between eight and twenty four weeks of certain operating costs.  The loans are federally guaranteed and, under certain circumstances, are eligible to be forgiven.  The loans are being administered by the Small Business Administration (SBA) and funded by SBA certified lenders.

Wilentz attorneys have reviewed the Paycheck Protection Program legislation, the PPP Flexibility Act, and the updates and related guidance from the IRS and the SBA in detail and are available to discuss how your business may qualify.  We are working with many of our business clients to address their questions and explore financing possibilities for their businesses, including:

  • During which period of time must I use my Paycheck Protection Program (PPP) loan in order to qualify for forgiveness?
  • What is the result to the Borrower if less than 60% of the Borrower’s PPP loan proceeds are used for payroll costs?
  • What is the impact to forgiveness if a Borrower finds that an employee is either unable or unwilling to return to work? 
  • Is a Borrower able to terminate employees for cause during the covered period without reducing forgiveness?  What if the Borrower chooses not to, or is unable to, replace such employees?
  • When must a Borrower apply to their lender for forgiveness?
  • For PPP loan amounts that are not forgiven, what are the repayment terms a Borrower can expect?
  • Can a Borrower defer repayment of PPP loan amounts that are not forgiven?
  • Can a Borrower defer its employer portion of payroll taxes even if the Borrower has received partial or full forgiveness of a PPP loan?

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