The CARES Act – Paycheck Protection Program – an Extension of the SBA 7(a) Loan Program

On Friday, March 27th Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act and it was signed by President Trump later that afternoon. The first section of the bill is focused on keeping employees of America’s small business on the job and receiving paychecks.

While there are still some unanswered questions on the program, here is some information on what is included in the bill.


  • Small business with less than 500 employees
  • 501(c)3 with less than 500 employees
  • Sole proprietorship
  • Individual operating as an independent contractor
  • Self employed individual who regularly carries on a business or trade
  • 501(c)19 Veterans Organization that meets the SBA size standards
  • A small business that otherwise meets the SBA’s size standards
  • Tribal business that meets the SBA size standard

Loan Amount

The maximum loan amount will be calculated based on 2.5 X your monthly payroll cost. The monthly payroll cost will be calculated using one of three methods:

  1. For businesses that operated during 2019, the amount will be based on the average of 12 months of prior payroll costs. The exact period for this 12 month period has not yet been confirmed.
  2. For new businesses, the average will be based on the average of January and February 2020 payroll costs.
  3. For seasonal employers, the average will be calculated using the payroll cost of Q2 2019.

Payroll costs will be determined using the following:

  • salaries, wages, commissions, or similar compensation
  • payment of cash tips or equivalent pay
  • vacation, sick or medical leave, and parental or family leave
  • allowances for separation or dismissal
  • employer paid health care benefits
  • employer matching in retirement benefits
  • payment of assessed local or state taxes such as state unemployment tax
  • sum of payments made to sole proprietors or independent contractors

The amount included in the calculation is limited to $100,000 annually per individual. Any amounts over $100,00 will be disregarded in the calculation.

Some of the other excluded items that will not count in the calculations are:

  • employer matching of social security and Medicare
  • qualified sick or paid FMLA related to the FFCRA – these are subject to immediate tax credits through the FFCRA Act

The loans will not be subject to personal guarantees, collateral, or loan fees.


The loans are subject to forgiveness based on the proceeds being used for the following expenses during the 8 week immediately following loan origination:

  • payroll costs
  • rent payments
  • utility payments (water, gas, electricity, telephone, or internet)
  • rent on leased equipment
  • interest on mortgages obtained during normal course of business

The amount of loan forgiveness will be calculated based on retaining the same number of employees during the 8 week period following loan origination as compared to the headcount during a window prior to the COVID 19 outbreak. More guidance on the specific calculation will be provided as the SBA releases additional information.

The information in the article is subject to change or further interpretation by the SBA and the final process and guidelines may be different than the information provided here. The US Chamber of Commerce has also provided a resource that may provide you with additional information.

Note:  This article has been edited to include a newer version of the US Chamber of Commerce Small Business Emergency Loan Checklist and Guide.