What is the Paycheck Protection Program?

As part of the CARES Act, the government released the Paycheck Protection Program (PPP) to help protect and sustain US small businesses during the COVID-19 pandemic. As long as the loan amount is used towards payroll and eligible business expenses, it does not have to be repaid and will be fully forgiven. 

Through the Small Business Administration (SBA), the government will provide $310 billion in funding and requires that applications are submitted through an approved lender of choice. Small businesses, nonprofit organizations, and sole proprietors are eligible to apply beginning April 3rd, whilst independent 1099 contractors can apply beginning April 10th. Although the original deadline to apply was June 30, it has been extended to August 8th, 2020 with an anticipated second round of funding following approval by the Senate and House of Representatives.

Who can apply?

Qualifying small businesses, sole proprietorships, independent contractors and self-employed individuals are eligible for the PPP. 

Your business is eligible for this loan as long as you have less than 500 employees and was fully operational on or before February 15, 2020.

What are the terms of this loan?

At least 60% of the loan must be used towards payroll costs and employee benefits. 

  • No more than 40% of the loan can go towards rents, utilities, and mortgage payments. 
  • Each business is eligible for up to 2.5 times their monthly average payroll. ● Each loan carries an interest rate of 1%. 
  • The loan has a maturity rate of 2 years and loans made after June 5, 2020, have a length of 5 years. 
  • Each loan is eligible for either partial or full forgiveness. 
  • In most cases, the small business owner or individual must make loan payments until either their forgiveness application is processed or 10 months after the covered period ends

How can I apply?

To apply, complete an application form and submit it through one of the SBA’s approved lenders before the deadline.

As part of your application, you’ll be asked to: 

  • Review and verify the direct economic impacts of COVID-19 upon your business and supporting its ongoing operations.
  • Confirm that these funds will be used to retain workers & maintain payroll or to make the mortgage, lease, and utility payments.
  • Confirm that you have not and will not receive another loan under this program. ● Confirm that the lender will calculate the eligible loan amount using the tax documents you submitted and must also confirm that the tax documents are identical to those you submitted to the IRS.

Furthermore, you’ll also need to provide payroll or bookkeeping records to prove your payroll expenses. These could include the following: 

  • Payroll processor records
  • Payroll tax filings
  • Payroll tax forms from 2019 (Forms 941, 940, and W-3)
  • Form 1099-MISC records
  • Schedule C for a sole proprietorship

If you have employees (and you’re paying yourself through payroll too), the easiest way to get the financial information you’ll need is by downloading a payroll report through your payroll provider.

For more information, please visit the Small Business Administration’s website with more details on the PPP and all other funding programs or check out this information sheet with frequently asked questions from the US Treasury.