Small businesses reeling from the impact of coronavirus may have good news coming in the form of loan forgiveness in the new paycheck protection loan program.

The $2 trillion federal stimulus package includes $350 billion in loans backed by the U.S. Small Business Administration, some of which will be forgiven depending on a company's circumstances. That's according to Neil Bradley, executive vice president and chief policy officer at the U.S. Chamber of Commerce. Bradley spoke at the National Small Business Town Hall, a live webinar hosted by Inc. and the Chamber on Friday.

The SBA's paycheck protection loan program is "really more of a loan that converts to a grant," Bradley said. Small businesses with fewer than 500 employees qualify, as will some larger companies. The program is aimed at helping businesses maintain their payroll during the significant business disruption caused by the coronavirus crisis.

Here's how the loan forgiveness works:

  • Your company's expenses for the eight-week period after the origination of the loan will be analyzed.
  • Every dollar your company spent on payroll, utilities, rent, or interest on mortgage debt will be added together. That amount will be forgiven, up to the total amount your company borrowed through the program.

There is one caveat, however. The amount that is forgiven will be reduced for businesses that lay off employees during the first eight weeks following the loan. Companies that reduce wages of employees who make less than $100,000 per year by 25 percent or more will also have the forgivable amount reduced by the amount of the pay cut.

Businesses that have already let employees go before accepting the loan and are trying to rehire them will not be subject to such penalties, however. And if those businesses rehire employees after accepting the loan, they'll receive additional credit to cover their wages.

Clarification: This story was updated with a clarification about companies that could avoid a reduction in the forgivable amount of their loan.