April 13, 2020

CARES Act: What is it, and How Can I Apply?

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The CARES Act has been top of mind for many small business owners over the past several weeks. Now that it has been finalized and the Paycheck Protection Program (PPP) has been rolled out, many small business owners are finding their way through the process.

Here, we have provided information about who is eligible and how to apply, as well as an estimation tool for use in calculating potential qualifying loan amounts, and some best practices to speed the application process.


In order to qualify you must:

      • Have been in business on or before February 15, 2020;
      • Meet the definition of a small business, which is 500 employees or less;
      • Companies with outside equity investors must meet the four tests for affiliation based on company control that need to be taken into consideration when calculating the number of employees. You can download the affiliation rules from the SBA website found here.


      • The Small Business Association is responsible for administering the PPP loans through nominated banks who started accepting applications on Friday, April 3rd, 2020.
      • The application can be downloaded from the SBA website or from most lender download portals.

Maximum Loan Amount and Loan Usage

The loan amount is 2.5 times the average monthly payroll costs during the one-year period, either the 2019 calendar year or the 12 months immediately preceding the date on which the loan is made (for new businesses, the measurement period would be January 1 through February 29, 2020) up to $10 million.

Payroll costs are defined as:

      • Salaries, wages, commissions or similar compensations
      • Vacation and parental/ family medical and sick leave
      • Allowances for dismissal or separations
      • Payments of group healthcare benefits including insurance premiums
      • Payments of retirement benefits
      • Payments of state or local tax assessed on the compensation of the employees

The loan funds can be used towards the following expenses incurred between February 15 and June 30, 2020:

      • Payroll costs (as defined above)
      • Interest on mortgage obligations
      • Rent
      • Utilities
      • Interest on any other debt obligations that are incurred before the covered period

How to Complete the Application

Most applications will be filed entirely online, so you will want to compile PDF reports of each document you intend to upload. Most of the data that will be assembled pertains to payroll information, so have the following items handy:

      1. SBA Loan Application form. This two-page form (link provided above) is provided on the SBA website, or through most lender’s PPP loan portals. Your lender should be able to provide you with a copy.
      2. Beneficial Owner form. This document is also provided on the SBA website, or through most lender’s PPP portals.
      3. Copies of Payroll Tax Reports filed with the IRS (Forms 940, 941, and state income and unemployment tax filings) for 2019 and 1Q 2020 (if 2020 forms are available).
      4. Payroll reports for the prior 12 months. Payroll journal entry reports are a good way to pull this information, though they should include gross wages including PTO, and can include vacation, sick, and other paid time off. The 12-month period should encompass the pay period prior to filing for the SBA loan.
      5. Health Insurance premium documentation. Monthly health insurance premium invoices are fine here, and the prior 12-month period should be included.
      6. Retirement plan work papers reflecting company payments into retirement plans for the 12 months prior to the SBA loan application. Plan administrator records would also be fine.


Once the documents are gathered, you are ready to prepare an estimate and complete application forms. Below is a downloadable worksheet to help demonstrate how to run calculations on a potential loan amount. Within the worksheet there are separate tabs to allow for the calculation of payroll expenses, healthcare expenses, retirement benefits, as well as borrower data requirements.

When the application is complete, attach all relevant files to the application and submit to your financial institution, who will review your information and either return with questions or submit to the SBA for funding.

The next article will focus on the issue of loan forgiveness.