An Overview of the Paycheck Protection Program

The Coronavirus Aid, Relief and Economic Security Act (CARES Act) included the Paycheck Protection Program (PPP) to encourage small business employers to continue to retain and pay employees during the economic slowdown. The PPP has been extremely popular, with the initial funding in the amount of $349 billion being completely allocated within 2 weeks. Congress enacted a second round of funding, which became available on April 27, 2020. The second round of funding is expected to be quickly exhausted and a third round of funding is expected.

The general parameters of the PPP are as follows:

  1. An employer with 500 or fewer employees can borrow a maximum of two and one-half months of its average payroll expenses (up to a $10 million cap);
  2. The employer must use at least 75% of the funds for eligible payroll expenses;
  3. The employer must not use more than 25% of the funds for other eligible expenses, including mortgage interest (but not principal), rent, utilities and interest on pre-existing debt. All of these obligations must have been in existence as of February 25, 2020; and
  4. The funds allocated to payroll must be expended within 8 weeks of the date the funds are received.

If the funds are used within the parameters of the PPP, the entire balance of the loan can be forgiven. To the extent funds are not used within the parameters, that portion of the funds converts into a loan with terms specified in the CARES Act.

Each of the elements of a PPP loan is subject to limitations and there is some uncertainty as to how some of the provisions will be applied. Blanco Tackabery is prepared to assist you with navigating the PPP process. Contact Jim Vaughan for assistance.

Jim has more than 30 years of experience representing lenders in commercial loan workouts, bankruptcy cases and commercial litigation.  This, coupled with his accounting background and business skills developed running a solo law practice for twelve years, gives him a common sense, results-driven approach to counselling clients and serving their needs effectively and efficiently.