The stimulus package passed in the Senate on Wednesday and headed for the House includes $349 billion for providing small businesses forgivable loans to bridge the economic shutdown caused by the coronavirus.

Under the bill, the Small Business Administration would provide the loans through its existing 7(a) program in amounts equal to two and a half months of payroll, with a maximum of $10 million. As long as the borrower uses the loan to cover payroll, interest on debt, rent or utilities, the loans would be forgiven. Details of the package are here.

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The idea is to help small businesses retain workers while the economy largely shuts down to fight the spread of the COVID-19 disease caused by the coronavirus. That would allow companies to reopen quickly once the contagion countermeasures are lifted, while keeping the employees financially stable.

The program would try to help around 99 percent of U.S. businesses and 47.5 percent of U.S. workers weather the pandemic, according to the most recent SBA figures.  

The bill would waive most of the SBA’s usual paperwork requirements and other prerequisites to speed the money into entrepreneurs’ hands. Borrowers making a good-faith statement are presumed eligible for the loans, which are limited to companies that have seen their business dry up or stop completely due to COVID-19.  

Most of the paperwork would come at the end: Companies would need to prove they actually needed the loans and used them as intended when they apply for debt forgiveness. 

Interest on the loans would be capped at 4 percent and only the principal of the loans would be forgivable. If a firm cuts workers or reduces their pay, the amount forgivable would be reduced proportionately.

Forgiven debt is usually treated as income for tax purposes, but that would not apply to loans under this program, thereby keeping participating companies from being saddled with a larger tax bill next year.

Earlier versions of the bill capped eligibility at businesses with 500 employees, but the latest version would broaden that to companies with 500 employees per location. That would allow businesses like a small restaurant chain with 600 employees across 20 locations to qualify, as well as franchisees.

In addition to the $349 billion in loan funds, the bill would provide the SBA $675 million to run the program, and $265 million for the SBA’s entrepreneurial development program grants for companies impacted by COVID-19 to help guide them to federal resources and provide other training.