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How Can I Get Significant Capital to Cover My Payroll Costs During COVID-19?

The Paycheck Protection Program (PPP) provides 100% federally guaranteed loans to employers to help cover payroll during the COVID-19 crisis.

The Paycheck Protection Program (PPP) provides 100% federally guaranteed loans to employers who maintain their payroll during the crisis.

The Paycheck Protection Program can help startups cover payroll costs through COVID-19.


The lesser of (i) 2.5 times average monthly payroll costs based on the prior year’s payroll costs (not including compensation in excess of $100,000) plus other disaster loans taken out after January 1, 2020, or (ii) $10,000,000.

Payroll Costs

A key term in the Act, defined as compensation paid to employees and independent contractors in the form of salaries, commissions, or similar, including severance, tips, vacation pay, family/parental leave, and sick leave. Payroll costs also include health care benefits, including paid sick or medical leave, and insurance premiums.

Paycheck Protection Program Eligibility

  • Businesses and entities in operation on February 15, 2020, and harmed by COVID-19 between February 15, 2020, and June 30, 2020.
  • Small business concerns, as well as any business concern, a 501(c)(3) nonprofit organization, a 501(c)(19) veterans organization, or Tribal business concern described in section 31(b)(2)(C) that has fewer than 500 employees or fewer employees than established by the relevant industry code.
  • Individuals who operate a sole proprietorship or independent contractor and eligible self-employed individuals.
  • Any business concern that employs not more than 500 employees per physical location of the business concern and that is assigned a North American Industry Classification System code beginning with 72 (accommodation and food service) for which the affiliation rules are waived.
  • Affiliation rules are also waived for any business concern operating as a franchise that is assigned a franchise identifier code by the Administration, and a company that receives funding through a Small Business Investment Company (SBIC).

Paycheck Protection Program Fees

SBA borrower and lender fees are waived. Prepayment fees are waived.

Important Paycheck Protection Program Waivers

  • No requirement to be unable to obtain credit elsewhere.
  • No personal guarantees
  • No collateral required. Loan Cap: $10,000,000

Covered Period

Retroactive to February 15, 2020, in order to help bring workers who may have already been laid off back onto payrolls. Loans are available through June 30, 2020.

Loan Origination

Paycheck Protection Program loans originate through the existing network of approved SBA lenders. The U.S. Treasury and SBA will work to expand the list of lenders over time. Such designated lenders may approve loans with delegated SBA authority (i.e.no separate SBA approval required). SBICs and BDCs may qualify as “additional lenders” under this emergency program.

Lender Reimbursement Rates

  • 5% on covered loans <$350K
  • 3% on covered loans $350K-<$2M
  • 1% on covered loans $2M+

Review and Approval

Delegated by the SBA to lenders themselves for eligibility determinations, which will speed processing significantly. Estimates are loans that will close in 5-7 days.

Permitted Uses for Funds from Paycheck Protection Loans

  • Payroll Costs
  • Health care benefits (including paid sick or medical leave, and insurance premiums)
  • Mortgage interest obligations (principal is not eligible)
  • Rent obligations
  • Utility payments
  • Interest on other debt obligations incurred prior to February 15, 2020

PPE Loan Amount

For the trailing twelve months prior to the date of the loan (use March 30 if applying in the next few weeks), calculate the average total monthly costs of:

“Payroll Costs as defined above BUT excluding the prorated portion of any compensation above $100,000 per year for any person. In other words, a person making $125K is only counted as $100K for the purposes of the calculation.

Group healthcare benefit costs and insurance premiums

Any State or local taxes assessed on the compensation of employees”

Note: “Payroll Costs” DOES NOT INCLUDE:

  • Federal Payroll Taxes
  • Any compensation of an employees whose principal place of residence is outside of the United States
  • Qualified sick and family leave wages for which a credit is allowed under the Families First Coronavirus Response Act

Calculate the potential loan components by taking the cost of each item, divide by 12, and then multiply by 2.5. For instance, if payroll was say $500,000 over the period, take $500,000/12 = $41,660 x 2.5 ⇒ $104,160 is added to the loan total.

  • Add up those calculations across payroll, independent contractors, healthcare and payroll taxes. The loan will be the lesser of a) that total, or b) $10 million.

Payment Deferral

Not less than 6 months and not more than 1 year, including payment of principal, interest, and fees, at the determination of the originating lender.

Loan Forgiveness

The Act includes provisions to forgive some or all of loans taken out under the Payroll Protection Program.

  • Amount: Provided borrower demonstrates that loan proceeds were used for eligible purposes during the 8-week period after loan origination date, amounts spent on:
    • Payroll costs (excluding individual compensation in excess of an annual salary of $100,000)
    • Rent
    • Mortgage interest (but not prepayments or principal payments) and rent payments on mortgages and leases in existence before February 15, 2020
    • Utilities, including electricity, gas, water, transportation, and phone and Internet access for service that began before February 15, 2020 Interest on other debt obligations incurred prior to February 15, 2020
  • Borrowers will apply for forgiveness directly with the lender
  • IMPORTANT: No documentation, no forgiveness – keep good records!
  • The amount forgiven may not exceed the principal of the loan
  • Remaining Balance => If a covered loan has a remaining balance after the forgiveness, it will have a maximum maturity of 10 years and an interest rate not exceeding 4%.
  • The amount of forgiveness will be reduced
    • In proportion to any reduction in the number of employees retained.
    • If any wages are reduced by more than 25%.
    • Restoration of employees previously laid off at the beginning of the period or wage or salary decreases made at the beginning of the period will not count against loan forgiveness as long as the restoration occurs prior to June 30, 2020.