Keeping American Workers Paid and Employed Act

Kimberly A. Kramer
Director, Corporate Department and Managing Director, Woburn Office
March 30, 2020

On Friday, March 27th, the “Coronavirus Aid, Relief, and Economic Security Act,” also known as the “CARES Act” became law.  Included within the CARES Act is the “Keeping American Workers Paid and Employed Act” (referred to in this article as the “Act”).  The Act greatly expands the availability of Small Business Administration loans available to businesses affected by the coronavirus pandemic.  Additional guidance regarding the implementation of the Act is anticipated from the SBA in the coming weeks. This content will be updated to reflect that guidance.

A U.S. business employing fewer than 500 employees is eligible to participate in the new SBA program created by the Act.  The program will guarantee 100% of loans to eligible businesses.  The maximum loan amount available to an individual business is 2.5 times the average monthly amount paid by the business to satisfy payroll costs during the 12 month period preceding the loan.  Eligible operating costs include payroll costs up to $100,000 per employee, group health insurance premiums, retirement benefits, sick and vacation leave, and state and payroll local taxes..  SBA disaster relief loans made on or after January 31, 2020 may also be refinanced through this program.  The lending amount is capped at $10 million.

Recipients of loans under the Act may receive forgiveness of eligible operating costs including payroll costs, mortgage interest, rent, interest on debts incurred prior to February 15, 2020, and utilities including phone and internet.  The loan funds may be used to pay these costs during the 8-week period beginning on the date the loan is originated.  The amount of forgiveness available will decrease if the recipient reduces the number of full-time employees or their salaries or wages.  Specifically, the amount of forgiveness is based in part on the average number of full-time employees per month during either of two periods: February 15, 2019 through June 30, 2019, or January 1, 2020 through February 29, 2020, with the borrower being allowed to elect one of these periods.  Loan forgiveness is also subject to reduction based on decreases in an employee’s total salary where such reductions exceed 25% of the salary paid to the employee during the most recent full quarter of employment prior to the loan origination date.  Amounts forgiven are excluded from the gross income of the recipient for tax purposes.

All SBA fees are waived under the Act and businesses will not be required to demonstrate an inability to obtain credit elsewhere, to provide the personal guaranty of the owners, or to provide a security interest business assets as collateral for the loan.  Loans with a remaining balance after the application of the loan forgiveness provisions have a maximum maturity date of 10 years from the date on which the borrower applies for loan forgiveness.  Interest on the remaining balance may not exceed four percent per annum.  Lenders administering the loans must permit the business to defer all payments for a minimum of six months and a maximum period of one year.

Additional terms and requirements may be added by the SBA when it issues the regulations and guidance directed by the Act.  Please refer to our Coronavirus Resource Center at for more information on the Act and other initiatives of federal and state governments.  The Resource Center will be updated regularly as information becomes available.

To view the Keeping American Workers paid and Employed Act – Payroll Protection Loan chart, click here.