Small Business Paycheck Protection Program
On March 27, 2020 President Trump signed H.R. 748 “Coronavirus Aid, Relief, and Economic Security Act” or “CARES Act” into law allocating approximately $2.2 trillion into emergency spending to help combat economic issues as a result of the COVID-19 Coronavirus.

The CARES Act created the Paycheck Protection Program (“PPP”) that authorized up to $349 billion in forgivable loans to small businesses to pay their employees and cover certain expenses for up to 8-weeks after the date of the loan. These loans are available through existing Small Business Administration (SBA) lenders, any federally insurance depository institution, federally insurance credit unions, and Farm Credit System institution that is participating.

Employers that take advantage of this lending program are not eligible for the Employee Retention Credit also created by the CARES Act. The Employee Retention Credit provides a refundable payroll tax credit for 50% of wages paid by eligible employers to certain employees during the COVID-19 crisis. See our CARES Act – Business and Individual Tax Provision email for more information about the Employee Retention Credit and a summary of other business and individual tax provisions created by the CARES Act.
Any employer that employed fewer than 500 employees (unless you are in the food/accommodation business, then the 500 employees is per location) (full and part-time), and was in operation on February 15, 2020, who paid wages and payroll taxes or paid independent contractors as reported on a Form 1099-MISC are eligible.
The maximum loan amount under this program is the lesser of:

  • Average total monthly payroll costs incurred during the 1-year period before the date on which the loan is made multiplied by 2.5 plus any outstanding amounts of any Economic Injury Disaster Loan (EIDL) obtained on or after January 31, 2020 which is to be refinanced under this loan


  • $10,000,000

When calculating the average monthly payroll costs the following are INCLUDED:

  • Salary, wage, commission, or similar compensation.
  • Payment of cash tips or equivalent.
  • Payment for vacation, parental, family, medical or sick leave.
  • Allowance for dismissal or separation.
  • Payments for group health care benefits, including insurance premiums.
  • Payment of retirement benefits.
  • Payment of state or local tax assessed on the compensation of employees.

When calculating the average monthly payroll costs the following are NOT INCLUDED:

  • Compensation for an individual employee in excess of $100,000.
  • FICA (Social Security and Medicare) taxes.
  • Compensation of an employee whose principal place of residence is outside the United States.
  • Qualified sick leave or family leave wages under the Families First Coronavirus Response Act.
For 8-weeks following the loan date, the proceeds from the loan may be used to cover the following expenses.

  • Payroll cost including benefits
  • Interest on mortgage obligations, incurred before February 15, 2020.
  • Rent, under lease agreements in force before February 15, 2020.
  • Utilities, for which service began before February 15, 2020.
Under the PPP the borrower must make a “Good Faith Certification” that:

  • Current economic uncertainty makes the loan necessary to support your ongoing operations.
  • The funds will be used to retain workers and maintain payroll or to make mortgage, lease, and utility payments.
  • You have not and will not receive another loan under this program.
  • You will provide to the lender documentation that verifies the number of full-time equivalent employees on payroll and the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight weeks after getting this loan.
  • Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.
  • All the information you provided in your application and in all supporting documents and forms is true and accurate. Knowingly making a false statement to get a loan under this program is punishable by law.
  • You acknowledge that the lender will calculate the eligible loan amount using the tax documents you submitted. You affirm that the tax documents are identical to those you submitted to the IRS. And you also understand, acknowledge, and agree that the lender can share the tax information with the SBA’s authorized representatives, including authorized representatives of the SBA Office of Inspector General, for the purpose of compliance with SBA Loan Program Requirements and all SBA reviews.
Any portion of the loan proceeds that are used to pay for the above costs following the 8-week period beginning on the origination date of the loan are eligible for forgiveness. In order for these amounts to be forgiven, documentation will have to be provided. It is also anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.

Documentation needed for calculation of the forgiveness amount may include:

  • Quarterly IRS forms 941 and 940 payment verification for the following periods:
  1. March 31, 2019 and June 30, 2019.
  2. March 31, 2020 and June 30, 2020 when available.
  • Canceled checks, payment receipts, and bank statements showing payment of the qualified expenses paid from February 15, 2020 to June 30, 2020

The loan forgiveness amount may also be reduced if there is a reduction in full time equivalent employees or if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019. You have until June 30, 2020 to restore your full-time employees and salary levels for any changes made.

Any amounts that are not forgiven will have an automatic deferral of payment for 6 months but will accrue interest at 0.5%. The interest rate will not be determined by your credit worthiness, but will be the same for all borrowers. At this time, the exact rate has yet to be determined but will not exceed 4%. The loan repayment period will be 2 years from the loan application date.
Any loan made under the PPP is backed by the SBA and requires no collateral or personal guaranties. There is no recourse against any individual shareholder, member or partner of an eligible recipient of a loan for nonpayment unless, the proceeds are used for purposes not authorized.
Small businesses and sole proprietorships can apply for and receive loans starting April 3, 2020 and independent contractors and self-employed individuals can apply for and receive loans starting on April 10, 2020. Many of the lenders that will be offering PPP loans are in the process of finalizing their loan process and many not be ready to issue loans by the date listed. Check with your lending institution on when they will be ready to process these loans. The Department of Treasury has provided the following loan application, but many lenders may offer online portals to expedite the process.

To prepare for when the loan process begins, the below documentation will help you in your loan application process. While this is not all-inclusive list and your banker could require more or less information, this is a list of items that has been generated by the SBA and treasury as to what items will likely be necessary:

  • Payroll reports for 2019 and 2020 year to date showing the following broken down by employee:
  • Gross wages
  1. Paid time off
  2. Paid vacation
  3. Pay of family medical leave
  4. State and local taxes
  • 2019 and 2020 year to date Forms 941, 940, State Unemployment Insurance
  • 2019 business tax return if filed or 2019 profit and loss and balance sheet.
  • 2018 business tax return.
  • Documentation of funds received from an Economic Injury Disaster Loan since January 31, 2020.
  • Payments for group health care benefits, including premiums paid in 2019 and 2020 year to date.
  • Payment of any retirement benefits paid in 2019 and 2020 year to date.

The following is a guide and checklist for small businesses released by the U.S. Chamber of Commerce:

About Shelton & Company, CPAs, P.C.

Shelton & Company, CPAs, P.C. is a CPA firm specializing in the accounting needs of construction contractors and their related companies. If you have any questions about the information provided here or for more information about our firm, please contact us at 1-800-446-2534 or visit us on the web at