On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act contains an emergency loan program aimed at helping small businesses pay payroll and other operating costs during the COVID-19 pandemic.

Because access to federal loan assistance is critical to decisions regarding your business operations, we have summarized below the most relevant provisions of the CARES Act loan program. We will update this information once implementing regulations are adopted. To assist your understanding of the federal and state emergency loan programs, we have also included a chart comparing the CARES Act loan program, the federal SBA Economic Injury Disaster Loan program, and the Minnesota DEED Small Business Emergency Loan Program.

CARES Act Small Business Loan Program (the “Paycheck Protection Loan Program”)

Provides $350 billion in partially forgivable loans for small businesses impacted by COVID-19 to cover wages, rent, and other costs.

Eligible Businesses

• Businesses or nonprofits with no more than 500 employees, and sole proprietors, self-employed workers, and independent contractors in operation as of February 15, 2020. Food and accommodation franchises and affiliates (hotels, motels, restaurants, etc.) with multiple locations and no more than 500 employees at any location are also included.
• Businesses who have received an SBA Economic Injury Disaster Loan for a purpose other than one of the permitted uses of a CARES Act loan may receive loans under this program.

Loan Terms

• Loan amounts of up to the lesser of: (i) $10,000,000, or (ii) 2.5 times the average total monthly payroll costs incurred by the applicant during the one-year period before the loan is made. For seasonal employers, the one-year period is replaced by the 12-week period starting February 15, 2019, or at the employer’s election, the period from March 1, 2019 to June 30, 2019.
• Interest rates are capped at 4%.
• Payments can be deferred for up to one year.
• Loans can be used for payroll costs, employee salaries and compensation (not to exceed an annual salary of $100,000 for any employee, prorated for the covered period), interest payments on mortgages, rent and utility payments, payments toward group health care benefits, and interest on any other debt obligations incurred before the loan period.
• No personal guarantees or collateral are required.
• The loans are 100% guaranteed by the federal government.

Loan Forgiveness

• Loan proceeds used for payroll, mortgage interest, rent, or utility payments during the 8-week period beginning the day the loan was received are eligible for forgiveness.
• If an employer reduces staff during the loan period, as compared to a prior lookback period, the amount of loan forgiveness will be proportionally reduced. The employer can elect a lookback period of: (i) February 15, 2019 to June 30, 2019; or (ii) January 1, 2020 to February 29, 2020. For seasonal employers, the lookback period is February 15, 2019 to June 30, 2019.
• If an employer reduces employee wages, the amount forgiven will be reduced in proportion to the reduction in pay of any employee in excess of 25%, as compared to the employee’s pay during the most recent full quarter of employment prior to February 15, 2020.
• However, if the employer re-hires employees or reinstates wages before June 30, 2020, they will be eligible for full forgiveness.