This article is an extracted from and article by Fenwick & West LLP. & Treasury Department website.
Maximum Amount — The sum of (i) borrower’s average total monthly “payroll costs” during the one-year period leading up to loan origination multiplied by 2.5 (i.e., 2.5 times average monthly payroll costs) plus (ii) the outstanding amount of borrower’s EIDL, if any, made between January 31, 2020, and the date Paycheck Protection Loans are first made available (such amount to be used to refinance the Disaster Loan), in all cases capped at $10 million.
Payroll Costs — Includes:
- Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee);
- Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit;
- State and local taxes assessed on compensation; and
- For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.
Excluded is compensation to employees residing outside the U.S. and qualified sick leave and family leave wages that are creditable under the Families First Coronavirus Response Act.
Seasonal Employers — Can use a measurement period of either (i) the 12-week period beginning February 15, 2019, or (ii) March 1, 2019 – June 30, 2019, instead of the one-year period leading up to loan origination.
Companies Not in Business on June 30, 2019 — To use a measurement period of January 1, 2020 – February 29, 2020.
You can use loan proceeds for:
- Payroll costs, including benefits;
- Interest on mortgage obligations, incurred before February 15, 2020;
- Rent, under lease agreements in force before February 15, 2020 (note I have seen elsewhere that you can pay your mortgage – portion that is business related); and
- Utilities, for which service began before February 15, 2020.
