The Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) has been signed into law.  A significant part of this legislation provides financial assistance to small businesses by means of the “Paycheck Protection Program.”   This program will provide small businesses with loans which can be forgiven, in whole or part, based upon the borrower’s willingness and ability to maintain its pre-crisis level of employment.  The program generally applies to businesses with 500 or fewer employees.

The maximum amount a company can borrow is the lesser or $10,000,000 or the amount determined based on a formula of approximately 2.5 times the business’s average monthly payroll costs during the 12-month period before the loan. Payroll costs do not include any individual salary in excess of $100,000 per year.  Loan proceeds may be used for payroll expenses (including salary, wages, commissions, and group health insurance), mortgage interest, rent, utilities, and interest on debt incurred prior to February 15, 2020.     

The maximum interest rate is 4% per year, with a loan term of up to ten years.  No collateral or personal guaranties are required, and payments of principal and interest may be deferred for at least 6 months.  Perhaps most significantly, (a) the loan can be forgiven in whole or in part if the business retains or rehires employees at the same compensation level, and (b) the forgiveness will not result in taxable income from the cancellation of indebtedness. 

We are committed to assisting our clients through the loan process, and we will provide updates as more information becomes available.  Please contact Len Gambino at 312-648-2300 or with any questions you may have.  


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