Employer Financial Relief: Paycheck Protection Program


Recently, due to the COVID-19 crisis, federal financial assistance became available to small businesses, non-profits, and veterans’ organizations that have experienced economic hardship. How does an employer qualify for this loan forgiveness program? On what business expenses can the loan be used? How does an organization apply for this free money? This post will examine the new law and provide information on how to apply for this loan.


On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) became law. The bill provides $2 trillion in stimulus funding to assist individuals and businesses adversely affected by COVID-19. Perhaps the most substantial program in the Act is the Paycheck Protection Program (PPP). The PPP is available to all businesses, non-profits, and veterans’ organizations that employ 500 people or less. For this program alone, Congress has authorized up to $349 billion in forgivable loans.

The loan applicant can request up to 2.5 times the organization’s monthly payroll cost or $10 million, whichever is less. Eligible payroll costs include salaries, cash tips, payment for vacation, parental, family, medical or sick leave, health care benefits, insurance premiums, retirement benefits, and state or local tax assessments on employee compensation. Loan funds may also be used on mortgage interest, interest on other debt obligations, rent, and utilities. Borrowers are eligible to have 100% of their loan forgiven if they use the loan on payroll and other eligible operating expenses. At a minimum, at least 75% of the loan must go to payroll. The program is meant to incentivize employee retention. Loan forgiveness will be less robust for organizations that reduce their workforce or where there is an overall reduction of more than 25% of wages.

In order to qualify, the small employer must have been economically harmed by the COVID-19 pandemic between February 15, 2020, and June 30, 2020. Borrowers must be able to make a good-faith certification that the loan is necessary because of uncertain economic conditions created by COVID-19 and that they will use the funds to retain workers, maintain payroll, lease property, and pay utility payments.

Once the funds have been received, and in order to qualify for forgiveness, the borrower must use all of the loan money in the following eight weeks for payroll and other qualified operating expenses described above. The borrower must apply for forgiveness through the lender. Any part of the loan that is not forgiven must be repaid within two years at one percent interest.

Applying for the Paycheck Protection Program

The Small Business Administration (SBA) is responsible for implementing and overseeing this program. Employers interested in applying for the loan program should connect with an existing SBA lender. Here is a list of the most active SBA lenders from the SBA website. Organizations must complete a Paycheck Protection Program Application and submit it with all the necessary documentation to an approved lender by June 30, 2020.

Lenders began accepting applications for these loans on April 3, 2020. According to SBA officials, on the first day alone, lenders received approximately 10,000 applications for more than $3.3 billion. If your organization is interested in applying for funding, SBA recommends getting your application submitted as soon as possible. The funding cap will naturally limit the number of organizations that can receive funding. Congress may re-up this funding amount, but that is not guaranteed.

To request loan forgiveness, organizations should submit a request to the lender servicing the loan. The request should include documentation that verifies payroll payments as well as receipts for other eligible operating expenses. The borrower must certify that the documents are true and that the loan amount was used on eligible expenses. The lender has 60 days to make a decision on loan forgiveness.

For additional information on this process, review the Department of Treasury’s Paycheck Protection Program (PPP) Information Sheet: Borrowers. Other helpful information can be found on the Department of Treasury’s website and the Small Business Administration’s website.


The Payroll Protection Program is one way employers can seek financial relief from the federal government and retain employees in this challenging time. Organizations should be attentive to any additional guidance issued by SBA for changes or other relevant developments in processing these loan applications. And as always, consult legal counsel with organization-specific questions regarding compliance.


Featured Image by Rebecca Sidebotham.

Because of the generality of the information on this site, it may not apply to a given place, time, or set of facts. It is not intended to be legal advice, and should not be acted upon without specific legal advice based on particular situations