Paycheck Protection Program (PPP) Loan Facts.
What is the Paycheck Protection Program (PPP)?
The Paycheck Protection Program provides forgivable emergency loans. The program is designed for “Paycheck Protection” so businesses keep and rehire employees. As a result, if you spend your loan on payroll, rent, mortgage interest, or utilities then the government will forgive your loan so you don’t have to pay it back.
Will I be able to apply for a second PPP loan if I received funds from the first program in summer 2020?
The new round of PPP loans offer a “second draw” for harder-hit businesses that received PPP funding in 2020. Your may be eligible for a “second draw” provided your business does not employ more than 300 employees, has used or will use the full amount of the first PPP, and can demonstrate at least a 25 percent reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same quarter in 2019.
Click for more information about second draw PPP loans.
Will my PPP loan be fully forgiven?
Funds are provided in the form of loans that will be fully forgiven when used for certain designated expenses. These include: interest on mortgages, rent, and utilities (at least 60% of the forgiven amount must have been used for payroll--previously 75%), operations expenses (software, cloud computing, etc.), supplier costs, worker protection expenditures. 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.
Must I keep employees on my payroll or rehire them quickly?
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.
Are all small businesses eligible?
Small businesses with 500 or fewer employees—including nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors— are eligible. Businesses with more than 500 employees are eligible in certain industries. Small businesses with fewer than 300 employees may be eligible for a “second draw” loan if they received a PPP loan in the previous round.
What do I need to apply?
You will need to complete the Paycheck Protection Program loan application and submit the application with the required documentation to an approved lender that is available to process your application. The program expires on March 31, 2021, but we recommend applying as soon as possible, as funds are expected to go quickly.
What documents do I need to apply for my Paycheck Protection Program loan?
Please see a checklist here.
Do I need to first look for other funds before applying to this program?
No. The SBA is waving its usual requirement that you try to obtain some or all of the loan funds from other sources (i.e., waiving the Credit Elsewhere requirement).
How long will this program last?
The PPP program received $248 billion in new funding in December 2020, and at that time the program was extended to March 31, 2021. Funds are once again expected to go quickly, so we encourage you to apply as quickly as you can.
How many loans can I take out under this program?
The initial PPP loan program was intended to allow only one loan per EIN. However, as of the revisions in late 2020, if you already received PPP funding but qualify and can demonstrate sufficient economic harm, you may be eligible for a “second draw” PPP loan (see above).
What can I use these loans for?
You should use the proceeds from these loans on 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; and
- Covered operations expenditures such as software, cloud computing, and other human resources and accounting needs; and
- Covered property damage costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance; and
- Covered supplier costs
What counts as payroll costs?
Payroll cost 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; and
- Covered worker protection expenditure such as personal protective equipment and adaptive investments to help a loan recipient comply with federal and/or state health and safety guidelines; and
- For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.
Does the PPP cover paid sick leave?
Yes, the PPP covers payroll costs, which include employee benefits such as costs for parental, family, medical, or sick leave. However, it is worth noting that the CARES Act expressly excludes qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act (FFCRA) (Public Law 116–127). Learn more about the FFCRA’s Paid Sick Leave Refundable Credit online.
How large can my loan be?
In general, borrowers may receive a loan amount of up to 2.5X the average monthly payroll costs in the one year prior to the loan or the calendar year (entities in industries assigned to NAICS code 72, Accommodations and Food Services, may receive “second draw” loans of up to 3.5X average monthly payroll costs). No loan can be greater than $2 million. If you are a seasonal or new business, you will use different applicable time periods for your calculation. Payroll costs will be capped at $100,000 annualized for each employee.
How much of my loan will be forgiven?
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 utilities payments, operations expenses, covered property damage costs, or covered supplier costs over the 8 weeks after getting the loan. 60% of the funds must be used for payroll (formerly 75%). You will also owe money if you do not maintain your staff and payroll at appropriate levels.
- 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: Full-time employment and salary levels for changes made between February 15, 2020 and April 26, 2020 are forgivable as long as the employee(s) were rehired prior to December 31, 2020.
How can I request loan forgiveness?
You can submit a request to the lender that is servicing the loan. The request will include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. You must certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments. The lender must make a decision on the forgiveness within 60 days.
What is my interest rate?
1.00% fixed rate.
When do I need to start paying interest on my loan?
You may elect a covered period ending at the point of your choosing between 8 and 24 weeks after origination.
When is my loan due?
In 5 years.
Can I pay my loan earlier than 5 years?
Yes. There are no prepayment penalties or fees.
Do I need to pledge any collateral for these loans?
No. No collateral is required.
Do I need to personally guarantee this loan?
No. There is no personal guarantee requirement. ***However, if the proceeds are used for fraudulent purposes, the U.S. government will pursue criminal charges against you.***
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 this program.
- You will provide to the lender 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 getting this loan.
- Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities. 60% of the funds must be spent on 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 lender 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 lender 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.
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