CARES Act – The PPP and ESOPs

People on Street with PPE Masks

April 8, 2020 CSG Partners Staff

Since passage of the CARES Act, our team has been reviewing the Paycheck Protection Program’s (PPP) implications for companies with employee stock ownership plans (ESOPs). The PPP should provide significant support to middle market businesses in the form of low interest loans (1%) that are potentially forgivable.


Thanks to the nature of how PPP loans are calculated, ESOP companies may have access to an expanded benefits package.

On April 6, 2020, the US Small Business Administration (SBA), in consultation with the Department of the Treasury, provided updates concerning implementation of the PPP. One item of note is the $100,000 limit on an employee’s cash compensation, with regards to the PPP loan calculation. The SBA clarified that the limit applies only to cash compensation and not to non-cash benefits, such as employer contributions to retirement plans.

While we do not provide tax or legal advice, and you should always seek formal guidance from your tax advisor or counsel, please consider the following:

  • You’re permitted to apply for a PPP loan that’s equivalent to 2.5x your qualifying monthly payroll cost.

  • Contributions paid to your ESOP for 2019 can be included in your payroll calculation.

  • That contribution could significantly increase the amount of your PPP loan.  For example:

    • A standard company with $1MM in qualifying monthly payroll can apply for a $2.5MM PPP loan.

    • An ESOP company with $1MM in qualifying monthly payroll and a $3MM annual ESOP contribution in 2019 can apply for a $3.125MM PPP loan.

The PPP has a strict allocation pool, and funds will be distributed on a first-come, first-served basis. Applications are now being accepted.

The CARES Act also offers ESOP companies access to the Economic Injury Disaster Loan (EIDL) program. For more information, check out our article on EIDLs & ESOPs.

As an added resource to tax and legal advisors, our team is available to talk you through the potential benefits of the PPP to ESOP companies. Please call (212.443.5500), email (, or schedule a meeting online.


  • After this article was published, the US Small Business Administration (SBA) issued further guidance on PPP loan repayment obligations in change of control situations.

  • Read our article on New SBA Guidance on PPP and Change of Control to learn more. 

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