The Smarter Startup

17 Things to Know About the Paycheck Protection Program Loan

Paycheck Protection Program loan qualifications, deadlines, estimated amount, usage, type of coverage, certifications and interest rate.

The Paycheck Protection Program program provides 100% federally guaranteed loans to employers to cover payroll costs during the COVID-19 crisis.

#1 When can I apply for a paycheck protection program loan?

Starting April 3, 2020, small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other certain expenses.

Starting April 10, 2020, independent contractors and self-employed individuals can apply for and receive loans to cover their payroll and other certain expenses.

#2 Where can I apply for the Paycheck Protection Program?

You apply to a lender (bank, credit union, etc.), not to the government directly. Contact your bank and see if they are participating in the PPP loan program.

#3 What documents do I need to apply for the loan?

You will need to complete the PPP loan application and submit the application with the required documentation. We recommend you begin collecting the following documentation to support your application. Payroll reports for 2019 and 2020 year-to-date showing the following by employee and/or officers:

  • Gross wages
  • Paid time off
  • Paid vacation
  • Pay for family medical leave
  • State and local taxes (form 940, 941 or 944)
  • 1099’s for independent contractors (if applicable)
  • Health insurance premiums paid by the employer under a group health plan Sum of all retirement plan funding contributed by the employer (include 401K plans, Simple IRA & SEP IRAs)

#4 What can I use the Paycheck Protection Program loan for?

You should use the proceeds from your Paycheck Protection Program loan toward your:

  • Payroll costs, including benefits
  • Interest on mortgage obligations, incurred before February 15, 2020
  • Rent, under lease agreements in force before February 15, 2020; and Utilities, for which service began before February 15, 2020.

#5 What counts as payroll costs?

Payroll costs include:

  • Salary, wages, commissions or tips (capped at $100,000 on an annualized basis for each employee)
  • Employee benefits including costs for vacation, parental, family, medical or sick leave
  • Allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit
  • State and local taxes assessed on compensation
  • For a sole proprietor or independent contractor, the payroll costs includes: wages, commissions, income or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.

#6 How large can my loan be?

Loans can be for up to two months and half of your average monthly payroll costs from the last year. That amount is subject to a $10 million cap. If you didn’t have any operation in 2019, the Average total monthly payroll costs incurred for January and February 2020.

#7 Who can apply?

All businesses – including nonprofits, veterans organizations, Tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors – with 500 or fewer employees can apply. Businesses in certain industries can have more than 500 employees if they meet applicable SBA employee-based size standards for those industries.

#8 How does loan forgiveness work and how much of my loan will be forgiven?

The loan can be 100% forgiven if certain qualifications are met. Expenditures are eligible for forgiveness over an eight-week period:

  • Rent
  • Utilities
  • Interest payments on any mortgage obligations or other debt obligations incurred before February 15, 2020 (but not any payments or prepayments of principal)
  • Payroll costs

You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utility payments over the 8 weeks after getting the loan. Due to the likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs. You will also owe money if you do not maintain your staff and payroll.

Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.

Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.

Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.

#9 Do I need to first look for other funds before applying to this program?

No. The SBA is waiving the usual SBA requirement that you try to obtain some or all of the loan funds from other sources.

#10 How long will this program last?

Although the program is open until June 30, 2020, we encourage you to apply as quickly as you can because there is a funding cap.

#11 What is my interest rate?

1% fixed rate (updated 4/3) 

#12 When do I need to start paying interest on my loan?

All payments are deferred for 6 months; however, interest will continue to accrue over this period.

#13 When is my Paycheck Protection Program loan due?

In 2 years.

#14 Can I pay my loan earlier than 2 years?

Yes. There are no prepayment penalties or fees.

#15 Do I need to pledge any collateral for these loans?

No. No collateral is required.

#16 Do I need to personally guarantee this loan?

No. There is no personal guarantee requirement.

#17 What do I need to certify?

As part of your application, you need to certify in good faith that:

  • Current economic uncertainty makes the loan necessary to support your ongoing operations.
  • The funds will be used to retain workers and maintain payroll or to make mortgage, lease and utility payments.
  • You have not and will not receive another loan under the PPP program.
  • You will provide your relationship manager documentation that verifies the number of full-time equivalent employees on payroll and the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight weeks after receiving this loan.
  • Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities. Due to the likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.
  • All the information you provided in your application and in all supporting documents and forms is true and accurate. Knowingly making a false statement to get a loan under this program is punishable by law.
  • You acknowledge that the relationship manager will calculate the eligible loan amount using the tax documents you submitted. You affirm that the tax documents are identical to those you submitted to the IRS. And you also understand, acknowledge and agree that the relationship manager can share the tax information with the SBA’s authorized representatives, including authorized representatives of the SBA Office of Inspector General, for the purpose of compliance with SBA Loan Program Requirements and all SBA reviews.