BY Alberto Montequin|April 2, 2020

Updates to SBA Loans Under CARES Act

UPDATE 4/6/20 - The Small Business Administration (“SBA”) has released an Interim Final Rule regarding implementation of the CARES Act. The text of the Interim Final Rule can be found online at The following is a list of the most impactful clarifications of the Paycheck Protection Program that are contained within the Interim Final Rule –

The Coronavirus Aid, Relief, and Economic Security Act (or CARES Act), a $2 Trillion package, was signed into law on Friday, March 27, 2020, and provides for a substantial expansion of Section 7(a) of the Small Business Act for the period between February 15, 2020 and June 30, 2020 (the “covered period”) called the Paycheck Protection Program. Businesses are now eligible to apply for business loans under Section 7(a) and should consider the updated rules to evaluate eligibility.


Who is eligible for loans under the CARES Act?

7(a) loans will no longer be limited to “small business concerns”; instead, during the covered period, such loans will be available to

The requirement that applicants not have access to credit from other sources has been eliminated for the covered period.


Maximum Loan Amount

The maximum loan amount offered to an applicant will be calculated using the following formula, but will not exceed $10,000,000.00.

Payroll Costs include:

1) salary, wages, commissions, tips, or other such compensation to employees, sole proprietors, or independent contractors up to $100,000 per year, as prorated for the covered period,

2) payment of vacation, parental, medical or sick leave,

3) allowance for dismissal or separation, group health care benefits, including insurance premiums;

4) retirement benefits; and

5) state or local taxes on compensation.


Payroll Costs do not include:

1) compensation to individuals in excess of an annual salary of $100,000, as prorated for the covered period;

2) certain taxes under Chapter 21, 22, or 24 of the Internal Revenue Code;

3) payments to employees who do not reside in the United States; and

4) qualified sick leave for which credit is allowed under Sections 7001 or 7003 of the Families First Coronavirus Response Act.


Forgiveness of Loans under CARES Act

The CARES Act requires lenders to forgive certain amounts (based on Payroll Costs and other expenses of Borrower) of the 7(a) loans obtained during the covered period.

Amounts forgiven under this program will not be considered as gross income for purposes of taxation.


Other important facts regarding the loan program under the CARES Act

Each business is unique, so companies should review the various disaster relief loan programs available before choosing which one works best for your needs. If you are interested in discussing your business loan options with an attorney, our team is here to assist you with navigating the changing legal landscape due to COVID-19. For more information on ways our attorneys can help you during this time, visit our COVID-19 Response Team page HERE.


*Disclaimer: The information contained herein provides an overview of developing and ongoing legislation and does not constitute legal advice for any particular situation.