TITLE I of the CARES Act

TITLE I of the CARES Act – the “Keeping American Workers Paid and Employed Act.”

On Friday, March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law.

Among the many significant provisions of the CARES Act are the paycheck protection program and the terms and conditions for loan forgiveness included under Title I of the Act – the “Keeping American Workers Paid and Employed Act.”

The following summarizes these two significant provisions of Title I. This program, if executed efficiently and quickly by all of the stakeholders, should be a valuable resource for many businesses.

Paycheck Protection Program

The Paycheck Protection Program (“PPP”) will provide almost $350 billion in 100% federally guaranteed emergency loans to small businesses for payroll and cash-flow assistance. These loans will be administered by the Small Business Administration (SBA) and funded through SBA lenders.

More information for borrowers and the PPP loan application can be found on the U.S. Department of the Treasury’s website at: https://home.treasury.gov/policy-issues/top-priorities/cares-act/assistance-for-small-businesses.

Who Qualifies to Apply and Application Deadline?

There is a list of types of businesses that qualify. Generally, all businesses with fewer than 500 employees can apply including sole proprietors and independent contractors.

Determining Eligibility

Lenders will determine whether the business was in operation on February 15, 2020 and had employees for whom the borrower paid salaries and payroll taxes, or paid independent contractors.

Loan Amount

Loans can be for up to two months of your average monthly payroll costs from the last year plus an additional 25% of that amount. That amount is subject to a $10 million cap. If you are a seasonal or new business, you will use different applicable time periods for your calculation. Payroll costs will be capped at $100,000 annualized for each employee.

Included Payroll Costs

Payroll costs include: (i) compensation (salary, wages, commissions or similar compensation, payment of cash tips or equivalent; (ii) payment of vacation, parental, family, medical or sick leave; (iii) allowance for dismissal or separation; (iv) payment for group health care benefits, including insurance premiums; (v) payment for retirement benefits; and (vi) payment of any state and local tax assessed on the compensation of employees.

Excluded Payroll Costs

Payroll costs do not include: (i) compensation to an employee in excess of $100,000; (ii) taxes imposed or withheld under chapters 21, 22 and 24 of IRS code during the covered period; (iii) compensation for employees whose principal residence is outside US; (iv) qualified sick leave wages and qualified family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act.

Use of Loan Proceeds

Payroll costs, including benefits; Interest on mortgage obligations, incurred before February 15, 2020; Rent, under lease agreements in force before February 15, 2020; and Utilities, for which service began before February 15, 2020.

General Loan Terms

The loan terms are extremely favorable. Very low interest rate (the last rate we have seen is 0.5%), no personal guarantees for entity borrowers, no payments for 6 months, repayment due within 2 years to the extent not forgiven. Portions of the emergency small business loans qualify for loan forgiveness if a borrower satisfies certain conditions.

Loan Forgiveness Terms and Conditions

In summary, borrowers will owe money when their loan is due if they use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs. Borrowers will also owe money if you do not maintain staff and payroll.


This program is emerging quickly so it remains to be seen how quickly funds will be advanced. This is intended as a general summary of the CARES Act. Please call any of our attorneys at (856) 427-4200 if you have questions. We look forward to assisting in these difficult times.