On March 27, 2020, President Trump signed into law a massive $2 trillion stimulus bill, the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act or the Act), aimed at shoring up the U.S. economy in light of the disruption caused by the coronavirus pandemic. In addition to the widely discussed individual stimulus payments, the CARES Act contains extensive provisions expanding unemployment insurance, extending tax relief to individuals and employers, adopting healthcare measures, providing economic stabilization funds, and making other emergency appropriations. A number of the Act’s provisions are of particular interest to companies owned by employee stock ownership plans (ESOPs).

Small Business Loans

The Act makes two loan programs available to small ESOP-owned companies for the purpose of providing access to cash to help survive the pandemic’s economic disruption.

Paycheck Protection Program

The CARES Act directs the U.S. Small Business Administration (SBA) to establish a new loan program, known as the Paycheck Protection Program (PPP), to make SBA-guaranteed, forgivable loans of up to $10 million to qualifying small businesses. The proceeds of PPP loans may be used to cover payroll expenses, costs related to continuing group health care benefits, salaries or commissions, interest payments on mortgage obligations, rents, utilities, and/or debt obligations in existence as of February 15, 2020. Subject to a few exceptions, the PPP program applies to companies, including ESOP-owned companies, with 500 or fewer employees.

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