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Thank you for adjusting with us as we’ve temporarily altered our working situation to adhere to recommendations from national, state and local leaders and health professionals. Your health and the health of our employees is our primary concern. As you know by now, we are working remotely to minimize any interaction with staff and clients. However, we are remaining in constant virtual contact to continue serving you in the most efficient, professional, and safest ways possible. We trust you will not see any interruption in our service.  Please don’t hesitate to contact us with any questions.


The CARES act is a broad, wide-ranging act covering many facets of American life. It contains legislation that will impact your family in a positive way and contains specific business items that we will cover below.

We woke up this morning to the news that the Senate had a “handshake deal” for a two trillion dollar Coronavirus stimulus package, known as the Coronavirus Aid, Relief, and Economic Security Act” or the “CARES” Act. This package appears to have far-reaching impact for every American and every business. During the next couple of days, everyone will be trying to understand how this bill will be implemented and how quickly relief will be made available. As of this evening, it appears that the Senate has once again stalled and is still debating provisions of the bill.

While we don’t know all of the details, it is important that you adjust your business plans to maximize the potential aid in this bill. If you have the ability to exercise patience with your employees and business, it is important that you do so. We are working very hard to stay on top of this fast-changing situation. We pledge to keep you updated as the best we can, as soon as more information is made available. You can view the full text of the bill as published by the US Senate.

We have been in communication with Bennett, Bennett, & Trice, PLC in Lubbock and various leaders in Washington. We would like to thank our friends in West Texas and Washington for assisting us in accumulating this information. We have summarized our understanding of the items that we believe will impact you the most. If you read the full text of the bill, you will see that the Act is comprehensive. It also has not been signed into law, so certain items are subject to change and our summary of the act as it stands today will change. For now, we hope that our summary will be helpful to you.

Loan Period
The loan program ‘Covered Period’ will begin March 1, 2020 and end on December 31, 2020. During the covered period, any business concern, private nonprofit organization, or public nonprofit organization which employs less than 500 employees shall be eligible to receive a loan made through section 7 (a) of the Small Business Act.

How to determine the amount of the loan
(Your loan will be based on the lesser of the two amounts below)

1.  The loan will be based on the average total monthly payments you made for the year prior to when this loan is made.  The items you can include and average are: 

  • payroll payments
  • mortgage payments
  • rent payments
  • payments on any other debt obligations incurred during the 1 year period before the date on which the loan is made.

After you determine the average monthly payments, you will multiple the total by 4.  This will be your loan amount.


2.  $10,000,000

Allowable uses for the loan

During the covered period, a recipient of a loan made under section 7(a) of the Small Business Act may use the proceeds of the loan for:

  • Payroll support including paid sick, medical, or family leave
  • Costs related to the continuation of group health care benefits during those periods of leave
  • Employee Salaries
  • Mortgage Payments
  • Rent (including rent under a lease agreement)
  • Utilities
  • Any other debt obligations that were incurred before the covered period

Guarantee Amount For Section 7(A) Loans

It appears that the SBA will guarantee 100 percent of the balance of the entire loan.  This will help to relieve local banks of the possibility of loan loss.

Loan Forgiveness Definitions
We understand that the 7(a) loan forgiveness covered period shall begin on March 1, 2020 and end on June 30, 2020 and the amounts expended for the following will be forgiven:

  • Payroll costs – should not include
    The compensation of an individual employee in excess of $33,333 during the covered period (therefore, given that the covered period is 4 months, you could pay a single employee up to $8,250 per month – i.e. $33,000/4).
  • Qualified sick leave wages for which a credit is allowed under section 7001 of the Families First Coronavirus Response Act; or
  • Qualified family leave wages for which a credit is allowed under section 7003 of the Families First Coronavirus Response Act.

    (See our earlier email related to the Families First Coronavirus Response Act)

Loan Forgiveness
A recipient shall be eligible for forgiveness of indebtedness on a covered 7(a) loan in an amount equal to the cost of maintaining payroll continuity during the covered period.

Treatment of Amounts Forgiven –  The amount of loan forgiveness under this section for an eligible recipient shall not exceed the sum of:

  • The total payroll costs incurred by the eligible recipient during the covered period; and
  • The amount of payments made during the covered period on debt obligations that were incurred before the covered period.

Forgiveness Reduction Based on Reduction In Number of Employees – If the number of employees you have employed is reduced during the period, the amount of loan forgiveness under this section shall also be reduced.  

Regular Employer
The forgiveness reduction is calculated by the percentage equal to the difference obtained by subtracting the quotient obtained by dividing the average number of full-time equivalent employees per month employed by the eligible recipient during the covered period: by the average number of full time equivalent employees per month employed by the eligible recipient during the period beginning on March 1, 2019 and ending on June 30, 2019;

Seasonal Employer
In the case of a seasonal employer an eligible recipient that is seasonal employer, as determined by the Administrator, the forgiveness reduction is determined by the average number of full-time equivalent employees per month employed by the eligible recipient during the period beginning on March 1, 2019 and ending on June 30, 2019

Exception for tipped workers – An eligible recipient with tipped employees described in section 3(m)(2)(A) of the Fair Labor Standards Act of 1938 (29 U.S.C. 203(m)(2)(A) may receive forgiveness for additional wages paid to those employees.

The cancellation indebtedness under this section shall be excluded from gross income for purposes of the Internal Revenue Code of 1986.

What does all of this mean?
In plain English we believe this means:

  • Qualified businesses are eligible for a new plan that will provide approximately four months of capital to insure the continuation of their business, and the retention of their employees.  The funds will be in the form of a loan.
  • The portion of the loan attributable to employees will be forgiven (with some exceptions – i.e. if you terminated a portion of your workforce and have less employees than you had last year, the forgiveness will be reduced. 
  • The remainder of the loan will likely be termed out over a period of time (we have not been informed regarding a term), and the interest rate has yet to be identified (other Government Disaster loans are currently based on a 2.7% interest rate – it is reasonable to assume that will be similar to the proposed plan). 
  • Based on initial analysis, it appears that you cannot apply for and receive the CARES act loan and the SBA disaster relief loan.  We know that many companies are applying for the SBA Disaster relief loan.  It appears that the loans provided by the CARES act may be more advantageous.

Please keep in mind nothing has been finalized, the above items are not set in stone – they are a best guess based on the information we have received as of 4:00 pm today, Wednesday, 3/25.

We have received numerous comments from our clients regarding our emails, and certainly appreciate your feedback and questions.  Please feel free to forward these communications to anyone.  We are all Americans, we are all concerned, but we will get through this if we pull together.

Again, the full text of the bill as it presently stands is located here

Important Update:  Steve Mnuchin updated the nation via the Coronavirus Task Force press conference late this afternoon and has said he expects the SBA loan program to be up and running by the end of next week.  It will be a ‘very simple process’ and disbursed on the same day. All FDIC member banks will be briefed on administering these loans as well.

Please call or email any of us at Applied Payroll.  We will continue to monitor all developments and keep you informed to the best of our ability.

We appreciate your loyalty, patience, and trust in us.  We pray you will be safe and healthy in this time of uncertainty.


The Applied Payroll Family

Note: The Information Contained Within Is Not Tax Or Legal Advice. These Issues Are Complex, And Applicability Depends On Individual Circumstances. Businesses Should Consult Tax Or Legal Counsel Before Taking Action On Any Of The Items Identified Above.