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  • Section: Small Business Loans
  • Last updated: May 8, 2020, 3:35 p.m.

The Paycheck Protection Program ("PPP")

Paycheck Protection Program

Note: this article contains general information from the SBA website. This is not intended as legal or professional advice. Please consult with a qualified accountant for specific information.

What is the Paycheck Protection Program?

The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.

SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.

You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program.

The SBA resumed accepting Paycheck Protection Program applications from participating lenders on Monday, April 27, 2020 at 10:30am EDT.


Who can apply?

The following entities affected by Coronavirus (COVID-19) may be eligible:
Any small business concern that meets SBA’s size standards (either the industry based sized standard or the alternative size standard)

Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or Tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:

  • 500 employees, or
  • That meets the SBA industry size standard if more than 500
  • Any business with a NAICS Code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location
  • Sole proprietors, independent contractors, and self-employed persons


What can employers use the PPP funds for?

  • Payroll costs for full – time and part – time employees
  • Salaries, wages, commissions, or tips ($100,000 maximum per employee – gross earnings)
  • Employee benefits (example – vacation, sick leave, health care benefits, retirement benefits)
  • State and local taxes
  • Interest on mortgages (for loans incurred before February 15, 2020)
  • Rent (under lease agreements pre – February 15, 2020)
  • Utilities (if service began before February 15, 2020)
  • (Independent contractors do not count as employees. Do not include their payments when calculating your payroll costs.)


What size loan can I apply for?

PPP loans can be up to 2.5 times the borrower's average monthly payroll cost, not to exceed $10 million dollars.

Payroll costs included in the 250% calculation includes a wide variety of compensation, including wages, salary, commissions, paid time off, group benefits, retirement benefits, and severance pay. However, the calculation does not include costs of more than $100,000 relating to any one individual during the year. We are currently preparing a spreadsheet that can be used to calculate the potential loan size and loan forgiveness amount for companies looking to apply for this loan program.

How to calculate loan amounts – here’s link to SBA


What will lenders look for?

Although it is uncertain exactly what a bank will request, we are anticipating that companies should start gathering some of the following information to be prepared for when the program becomes available.

1. 2019 Payroll - including the last 12 months of payroll
2. 2019 Employees - 1099's for 2019 employees and independent contractors that would otherwise be an employee of your business. (Note: Do NOT include 1099's for services)
3. Healthcare Costs - all health insurance premiums paid by the business owner under a group health plan.
4. Retirement - your company retirement plan funding paid for by the company.

Can this loan be forgiven?

The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 75% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.

Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.

This loan has a maturity of 2 years and an interest rate of 1%. Link to SBA Site includes more general information, FAQ’s and lender forms and guidance:
Paycheck Protection Program

*This is not intended as legal advice; for more information, please consult with your accountant or an accounting professional"