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Paycheck Protection Loans

On Friday, March 27, 2020, the President signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which creates loan programs to assist small businesses during COVID-19-related mandated closures.

One such loan can be obtained via the Paycheck Protection Program (PPP). The Paycheck Protection Program is based on the SBA’s already existing 7(a) loan program and will make forgivable loans of up to $10 million available to qualifying small businesses.

Where is the Application for a Paycheck Protection Loan?

Paycheck Protection Program Application

PPP Borrower Fact Sheet

Small Business Owner’s Guide to the CARES Act

PPP Loan Forgiveness Application

For questions or to schedule an appointment with one of Gatherwright Freeman’s Kentucky or Ohio attorneys for assistance in completing a Paycheck Protection Loan please click here.

Who should I contact if I would like to get Paycheck Protection Program loan?

These loans are made through private banking institutions so please contact your local bank to determine whether they make SBA 7(a) loans or check this SBA list of 7a lenders at

Is my small Ohio or Kentucky business eligible for a loan through the Paycheck Protection Program?

A small Ohio or Kentucky business, including a qualifying nonprofit organization, is eligible for Paycheck Protection Program loans if it (a) meets the applicable North American Industry Classification System (NAICS) Code-based size standard or other applicable 7(a) loan size standard, both alone and together with its affiliates; or (b) has an employee headcount that is lower than the greater of (i) 500 employees or (ii) the employee size standard, if any, under the applicable NAICS Code. Businesses that fall within NAICS Code 72, which applies to accommodations and food services, are also eligible if they employ no more than 500 people per physical location. Sole proprietorships, independent contractors, and self-employed individuals are also eligible. It is unclear as of what date the size test will be applied, but historically, SBA size tests have been applied on the date of application for financing.

More information on the NAICS-Codebased size standards can be found here:–table-size-standards

Do my small Cincinnati, Ohio or Northern Kentucky business’s affiliates affect its eligibility for Paycheck Protection Program loans?

Applicants for SBA loan programs, including Paycheck Protection Program loans, typically must include their affiliates when applying size tests to determine eligibility. That means that employees of other businesses under common control would count toward the maximum number of permitted employees. A business that is controlled by a private equity sponsor would likely be deemed an affiliate of the other businesses controlled by that sponsor and could thus be ineligible for Paycheck Protection Program loans. However, the CARES Act waives the affiliation requirement for the following applicants:

1. Businesses within NAICS Code 72 with no more than 500 employees
2. Franchises with codes assigned by the SBA, as reflected on the SBA franchise registry
3. Businesses that receive financial assistance from one or more small business investment
companies (SBIC)

How are Paycheck Protection Program loans made?

Paycheck Protection Program loans will be made by lenders who are currently approved as 7(a) lenders or who are approved by the SBA and the Treasury Department to become Paycheck Protection Program lenders. Paycheck Protection Program lenders are delegated authority to make and approve Paycheck Protection Program loans, with no additional SBA approval required. Paycheck Protection Program lenders are only required to consider whether an applicant was in operation on February 15, 2020, and either had employees for whom it paid salaries and payroll taxes or paid independent contractors. Unlike other 7(a) loans, applicants are not required to show that credit is unavailable elsewhere or demonstrate repayment ability. Paycheck Protection Program loans are backed by a 100% guaranty from SBA.

How much can my Cincinnati or Northern Kentucky business borrow in Paycheck Protection Program loans?

The CARES Act increases the maximum availability of 7(a) loans, including Paycheck Protection Program loans, to $349 billion. The maximum Paycheck Protection Program loan available to any business is $10 million or, if less, 2.5 times the average monthly payroll costs of the business over the year prior to the making of the loan (practically, this may become the year prior to the loan application), excluding the prorated portion of any annual compensation above $100,000 for any person. Note that under the CARES Act, “payroll costs” include vacation, parental, family, medical, and sick leave; allowances for dismissal or separation; payments for group health care benefits, including insurance premiums; and retirement benefits. Calculations vary slightly for seasonal businesses and businesses that were not in operation between February 15 and June 30, 2019.

How can Paycheck Protection Program loan proceeds be used?

Paycheck Protection Program loan proceeds are generally to be used for:  Payroll costs, excluding the prorated portion of any compensation above $100,000 per year for
any person group healthcare benefit costs and insurance premiums mortgage interest (but not prepayments or principal payments) and rent payments interest on debt that existed as of February 15, 2020.

What are the primary terms of Paycheck Protection Program loans?

Paycheck Protection Program loans bear interest at a maximum rate of 4% and mature no later than 10 years after determination of the amount, if any, to be forgiven, as described below. Payments under Paycheck Protection Program loans and all other 7(a) loans will be deferred for 6–12 months, and the SBA is directed to issue guidance on the terms of this deferral. Unlike other 7(a) loans, Paycheck Protection Program loans have no collateral or personal-guarantee requirements. There will be no recourse to owners of borrowers for nonpayment, except to the extent proceeds are used for an unauthorized purpose. For Paycheck Protection Program loans, the SBA has waived prepayment penalties and has waived the guaranty fee and annual fee applicable to other 7(a) loans.

Can Paycheck Protection Program loans be forgiven?

Paycheck Protection Program loans can be forgiven to the extent that the loan proceeds have been used for the following costs incurred and payments made during the eight-week period after the loan is made:

o Payroll costs, excluding the prorated portion of any compensation above $100,000 per year for any person
o Group healthcare benefit costs and insurance premiums
o Mortgage interest (but not prepayments or principal payments) and rent payments on mortgages and leases in existence before February 15, 2020
o Certain utilities, including electricity, gas, water, transportation, and phone and Internet access for service that began before February 15, 2020
o Additional wages paid to tipped employees

However, the amount forgiven is reduced based on failure to maintain the average number of full-time equivalent employees versus the period from either February 15, 2019, through June 30, 2019, or January 1, 2020, through February 29, 2020, as selected by the borrower.

The amount forgiven is also reduced to the extent that compensation for any individual making less than $100,000 per year is reduced by more than 25% measured against the most recent full quarter.

Reductions in the number of employees or compensation occurring between February 15, 2020, and 30 days after enactment of the CARES Act will generally be ignored to the extent reversed by June 30, 2020. Forgiven amounts will not constitute cancellation of indebtedness income for federal tax purposes.

The application for forgiveness can be found here.

Can I get a paycheck Protection Program Loan if I got an Economic Injury Disaster Loan?

Yes, to the extent that the disaster loan was used for a purpose other than those permitted for Paycheck Protection Program Loans. Disaster loans may be refinanced with proceeds of Paycheck Protection Program loans, in which case the maximum available Paycheck Protection Program loan amount is increased by the amount of disaster loans being refinanced.

Can Gatherwright Freeman help my Cincinnati or Northern Kentucky business apply for a Paycheck Protection Loan?

Yes, the attorneys at Gatherwright Freeman can help your Cincinnati or Northern Kentucky business apply for a Paycheck Protection Loan. We can assist clients with quickly filing outstanding tax returns that must be filed in order to apply for the loan, and we can assist your Cincinnati or Northern Kentucky business in properly preparing the Paycheck Protection Loan application. To schedule an appointment please click here.