How to Use the Proceeds from a Paycheck Protection Program Loan Correctly to Facilitate Maximum Loan Forgiveness

The Paycheck Protection Program (“PPP”) included in the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) became law on Friday, March 27, 2020. The PPP is designed to allow the Small Business Administration (“SBA”) to make loans through certified lenders to small businesses, 501(c)(3) nonprofit organizations, independent contractors and certain other entities. If used appropriately, these loans may become forgivable up to 100% of the principal amount borrowed. Although the SBA is not currently accepting new applications for the PPP, more funding may become available in the near future.

If your business received a loan through the PPP, it is important to utilize the proceeds for “covered costs”, i.e. payroll costs, rent, utilities, and interest. Pursuant to Section 1106 of the CARES Act, a recipient is eligible for forgiveness of indebtedness if the loan proceeds are used for covered costs within the 8 week period following receipt of funds. At least 75% of the loan proceeds must be spent on payroll costs to maximize loan forgiveness. Furthermore, in order to use any of the loan proceeds on rent, utilities or interest, those obligations must have existed prior to February 15, 2020. Importantly, for rental obligations, this means there was a lease in force before February 15, 2020.

If your business received funding through the PPP and require assistance in ensuring the proper use of those funds or you are interested in apply for a PPP loan, we can help. Please contact Attorney Tom MacNeely at tmacneely@rjglaw.com or Attorney Zachary Berger at zberger@rjglaw.com of our Real Estate Department to learn more about these services.

Nonprofit Entities May Be Eligible to Apply for Financial Assistance

Nonprofit entities, including religious organizations and veteran organizations, suffering from the impact of the COVID-19 crisis, are eligible to apply for financial assistance in the form of Coronavirus Aid, Relief, and Economic Security Act (“CARES”) Paycheck Protection Program loans and SBA Economic Injury Disaster loans. In addition to these loan programs, CARES has deemed nonprofit entities eligible to defer payment of its share of social security taxes and possibly receive an employee-retention tax credit. Moreover, CARES expanded unemployment benefits to employees of nonprofit and religious organizations that were laid off as a result of the COVID-19 crisis.

If your nonprofit or religious organization has questions about CARES or needs assistance in considering and/or applying for these loan programs and/or other relief efforts, Rosenn Jenkins & Greenwald LLP is available to promptly assist you. Please contact Paul T. Rushton (prushton@rjglaw.com), Lee S. Piatt (lpiatt@rjglaw.com) or Christyan Telech (ctelech@rjglaw.com) of our Business & Finance Department to discuss the available options.


As the COVID-19 virus continues to affect the health of our communities and the operation of the economy, Federal, state and local governmental authorities, as well as certain for-profit and non-profit organizations, have established loan programs and/or other relief efforts to assist eligible businesses that have been adversely affected by the Coronavirus crisis.
For example, pursuant to the Coronavirus Aid, Relief, and Economic Security Act (“CARES”), the Federal government has created the Paycheck Protection Program (“PPP”) that is designed to make loans available to small businesses to encourage employee retention and assist employers in meeting ongoing payroll and debt obligations. PPP loans are guaranteed by the Small Business Administration (“SBA”) and made through existing SBA-approved lenders.
There are minimal requirements for eligibility for a PPP loan. In general, the borrower must have less than 500 employees and make a good-faith certification that the COVID-19 crisis necessitated the PPP borrowing and that the PPP loan will be used only for specified purposes, including certain interest payments, payroll costs, employee group health care benefits, rent, and utility payments. PPP loans do not require the posting of collateral security and have a maximum rate of interest of 4%. PPP loans are also eligible for full or partial forgiveness.
Starting on April 3, 2020, small businesses and sole proprietorships can apply for PPP loans through lenders that have previously offered SBA loans. Beginning on April 10, 2020, independent contractors and self-employed individuals can apply for PPP loans to cover their payroll and other certain expenses through existing SBA lenders. The current end date for PPL loan applications is June 30, 2020.
Because it is anticipated that the demand for PPP loans will be high and that the existing funding for the PPP will be insufficient to meet the anticipated PPL loan applications, it is strongly recommended that eligible borrowers submit an application for a PPP loan through a SBA-approved lender promptly following the opening of the window for PPP applications (i.e. on April 3, 2020 for eligible small businesses and sole proprietors and on April 10, 2020 for eligible independent contractors and self-employed individuals).
If you are interested in confirming your eligibility for a PPP loan, obtaining assistance with your PPP loan application, identifying a SBA-approved lender and/or learning more about other loan programs and relief assistance, Rosenn, Jenkins & Greenwald, LLP and its Business & Finance Department are available to assist you. Please feel free to contact any of the partners in our Business & Finance Department, including Paul T. Rushton at prushton@rjglaw.com, Steven P. Roth at sroth@rjglaw.com, or Lee S. Piatt at lpiatt@rjglaw.com. We are available to promptly assist you with these very important issues. Stay safe and healthy.