Hi Friends,

We want to inform you about a great Payroll Protection program that was signed into law on 3/27/20.  It is part of the Coronavirus Aid, Relief and Economic Security and CARES Act. This is a $350-billion program intended to provide US small business with eight weeks of cash-flow assistance through 100 percent federally guaranteed loans.

This is an SBA 7(a) loan program that eventually can be converted into a grant for businesses.  The underwriting will be done by private banks who are authorized to make a determination on borrower eligibility and creditworthiness without going through the SBA. These lenders will not be determining eligibility based on repayment ability, but rather whether the business was operational on February 15, 2020 and had employees or independent contractors and paid salaries and payroll taxes.  We recommend that you apply as soon as possible because banks will be flooded with applications.

Our firm can assist you in applying for the Payroll Protection Program.

The requirement of the borrower is that the borrower makes a good faith certification that the loan is necessary because of the uncertainty caused by Covid19.

Who is eligible?

Based on the information we have right now, this program is for any business with fewer than 500 employees, self-employed, sole-proprietors, independent contractors and non-profits. The program is available through June 30th, 2020.  The intent of this program is that you use this money as a bridge for the next 2 months to pay for your operating expenses, payroll and to keep employees employed.

The SBA will forgive the portion of the loan used for payroll, rent, mortgage interest and utilities payment incurred from February 15, 2020 through June 30, 2020.  Up to 100 % of the loan will be forgiven.

Application process:

List of Particpating Banks:


Benefits to the borrower:

•    Borrowers are eligible for loan forgiveness equal to the amount spent by the borrower during an eight week period after the origination date of the loan of payroll cost, interest payment on any mortgage incurred prior to February 15, 2020 and payment on any utility for which service began before February 15, 2020;
•    Borrower and lender fees are waived;
•    Collateral and personal guarantees requirements are waived;
•    Interest rate is 4 % with loan maturity up to 10 years;
•    No prepayment fees will be charged;
•    Initial loan payments can be deterred for 6-12 month.

How much money can my business receive through this 7(a) loan?

The maximum loan amount is $10 million. The A borrower will be eligible to receive the loan amount of 2.5 x the borrower’s average monthly payroll expenses (subject to a cap of a $100,000 of annual salary per employee).

Payroll costs include:

•    salary, wage, commission, or similar compensation;
•    payment of cash tip or equivalent;
•    payment for vacation, parental, family, medical, or sick leave;
•    allowance for dismissal or separation;
•    payment required for the provisions of group health care benefits, including insurance premiums
•    payment of any retirement benefit
•    payment of state or local tax assessed on the compensation of the employee

For Sole Proprietors, Independent Contractors, and Self-Employed Individuals:

The sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in one year, as pro-rated for the covered period.

Excluded payroll costs are:

•    Compensation of an individual employee in excess of an annual salary of $100,000, as prorated for the period February 15, to June 30, 2020
•    Payroll taxes, railroad retirement taxes, and income taxes
•    Any compensation of an employee whose principal place of residence is outside of the United States
•    Qualified sick leave wages for which a credit is allowed under section 7001 of the Families First Coronavirus Response Act (Public Law 116– 5 127); or qualified family leave wages for which a credit is allowed under section 7003 of the Families First Coronavirus Response Act.

A borrower is eligible for loan forgiveness equal to the amount the borrower spent on the following items during the 8-week period beginning on the date of the origination (when you get the money) of the loan:

•    Payroll costs (using the same definition of payroll costs used to determine loan eligibility)
•    Interest on the mortgage obligation incurred in the ordinary course of business
•    Rent on a leasing agreement
•    Payments on utilities (electricity, gas, water, transportation, telephone, or internet)
•    For borrowers with tipped employees, additional wages paid to those employees

The loan forgiveness cannot exceed the principal.

The amount of loan forgiveness calculated above is reduced if there is a reduction in the number of employees or a reduction of greater than 25% in wages paid to employees.

This reduction calculation can be done based on number of full time equivalent employees of based on a reduction in salaries.
As an example, if we had an average of 4 full time equivalent employees for the period of February 15, 2019 to June 30, 2019, we would have to have at least 3 full time equivalent employees for the period of February 15, 2020 to June 30, 2020.

Reductions in employment or wages that occur during the period beginning on February 15, 2020, and ending 30 days after enactment of the CARES Act, (as compared to February 15, 2020) shall not reduce the amount of loan forgiveness if by June 30, 2020 the borrower eliminates the reduction in employees or reduction in wages.


Since the payroll protection program was passed on 3.27.20 SBA has not created implementation regulations. It is expected to be done within 15 days and after that US Department of Treasury will be approving new lenders. We will keep you updated when the forms are available. If you don’t have a banker to ask about this we can refer you to one.

If you have any questions or if you would like our help in applying for these loans, please do not hesitate to contact us.

Thank you,

Steven Zelin CPA
Managing Partner
Zelin & Associates CPA LLC
555 Eighth Avenue, Suite 1203, New York, NY 10018
(Between 37th & 38th Streets)

Tel.(646) 678-4496
Fax (917) 595-1548