- The PPP loan program restarted, following the appropriation of new funding on Friday, April 24, 2020.
- PPP loans are available for the lesser of $10 million or 2.5 times your average monthly payroll.
- 100% of your loan could be forgiven if you follow guidelines.
- Passage of the PPP Flexibility Act of 2020 relaxes many PPP loan guidelines.
- You can apply for both a PPP and EIDL loan.
- Check eligibility before you apply.
- You can apply through any SBA approved 7(a) lender.
- Source: H.R. 748
PPP Eligibility
In addition to meeting the size requirement (500 or fewer employees for most companies), you must show that your business has been negatively impacted by the coronavirus. You will do this, in part, by certifying on your PPP application that current economic uncertainty makes the loan request necessary.
Eligibility is further broken down to include:
Any business categorized under "Accommodation or Food Services," such as restaurants and hotels that have 500 or fewer employees per location
Tribal businesses
Independently owned franchises
Self-employed workers, independent contractors, gig workers, and sole proprietors.1 The PPP loan application for those people went live April 10, 2020, according to the SBA.
Waring: The deadline to apply for a Paycheck Protection Program Loan is June 15, 2020. Beware of scammers offering a way to get a PPP loan; the Federal Trade Commission filed a case against one such company on April 17, 2020.
Where to Apply for PPP
As noted above, PPP loans are being administered by approved SBA lenders and are actually a new form of the existing SBA 7(a) loan program. You can apply for your PPP loan through any of the 1,800 participating SBA approved 7(a) lenders or through any participating federally insured depository institution, federally insured credit union, and Farm Credit System institution.
Other lenders will be available to make PPP loans once they are approved and enrolled in the program. Start by consulting with your local lender as to whether it is participating. If you have trouble locating a lender, try using the SBA Paycheck Protection Program lender search tool.
Do not use any other road to apply for a PPP loan; scammers are already going after small business owners, reports the Federal Trade Commission, which filed a case against one such company on April 17. 4 Only apply by first going to the SBA website. And know that the SBA will never ask for Social Security numbers, or bank account or credit card numbers up front, the FTC cautioned.
How PPP Loan Forgiveness Works
Important changes to PPP loan forgiveness became law with signing of the PPP Flexibility Act on June 5, 2020. All or part of the loan you receive under PPP could be forgiven provided you keep all full-time equivalent employees (FTEEs) on payroll—or rehire them within 24 weeks of receiving your loan (or by December 31, 2020, whichever comes first). Payroll costs must be 60% or more of the amount forgiven. Only 40% of the amount forgiven can be used on non-payroll expenses. The forgiveness won't happen until the end of the 24-week period of employment following receipt of your loan.8 1
Employee payroll costs: Salary, wages, commissions, tips (capped at $100K per employee); Benefits including vacation, parental, family medical or sick leave; State and local taxes assessed on compensation.
Sole proprietors: Wages, commissions, income, or net earnings from self-employment (capped at $100K)
Seasonal businesses: Average monthly payroll between Feb. 15 and June 30 (capped at $100K per).
New businesses: Average monthly payroll from Jan. 1 to Feb. 29 (capped at $100K per employee).
Other eligible forgivable costs: Interest on mortgages; Rent under lease agreements; Utilities.
You must request forgiveness of your loan from your lender in writing. Your request should document the number of FTEEs, pay rates, your payments on an eligible mortgage or lease, and utility payments. Your lender has 60 days to reply.6.
But what happens to the loan if laid-off employees receiving that extra $600/week on unemployment insurance refuse to return to work when they are offered their jobs back under the PPP? SBA and Treasury issued a new rule excluding laid-off employees whom the borrower offered to rehire (for the same salary/wages and same number of hours) from the loan forgiveness reduction calculation spelled out in the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136." 9
Further, the PPP Flexibility Act of 2020 added two new exceptions that let borrowers achieve full forgiveness even if they don't fully restore their workforce: Borrowers can reduce workforce requirements based on the inability to find qualified employees or if they were unable to restore operations to Feb. 15, 2020, levels due to COVID-19 restrictions.
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