How to get an emergency SBA loan from the Paycheck Protection Program (2021 updates)

Important PPP update for 2021

On December 22, 2020, Congress passed a bill renewing funding under the CARES Act, including an additional $284 billion earmarked for America’s struggling small businesses. The rules and application process for PPP loans and forgiveness have been modified, with more businesses eligible for PPP loans, more expenses forgivable, and a simplified application process.


In this 3-minute read:

  • How much money can I get from the Paycheck Protection Program?
  • Do I have to pay the government back?
  • What are the payback terms and interest rate for emergency SBA loans?
  • How do I know if my business qualifies?
  • Other sources of emergency business funding

The CARES Act, a $2 trillion federal stimulus package, was passed by congress on March 27, 2020. Among other things, the bill allocated $350 billion to American small businesses that are reeling from shutdowns imposed to slow the spread of the novel coronavirus (COVID-19) via a provision called the Paycheck Protection Program. Since then, the PPP has been renewed in funding several times, including a $285 billion influx of fresh capital in late December 2020

On June 5, 2020, President Trump signed into law new updates to PPP loan forgiveness requirements, extending the covered period to 24 weeks, reducing the minimum loan funding that must be spent on payroll to 60%, and easing the requirements for maintaining staffing and compensation levels. Please read the details here.

On April 23, 2020, the second round of funding for the PPP and EIDL programs was passed by congress and signed by President Trump, including an additional $310 billion to the PPP program, $10 billion for EIDL advances or “grants,” and roughly $60 for other disaster loans under the program.

In late December, 2020, congress approved a new $900 billion relief package including an extension of the PPP loan program, including “second draw” PPP loans for businesses that received PPP funding in 2020. Please click for more details about PPP loans in 2021.

On March 30, 2021, President Biden signed into law the PPP Extension Act of 2021, effectively extending the PPP application window through May 31, 2021.

These bills have been a critical measure to keep falling small businesses alive. We surveyed 2,300 small business owners and found that 1 in 5 would shut down forever within 30 days if sales stopped entirely, and more than half of all local businesses would die within 90 days. Many businesses are facing exactly that reality. 

This urgency is reflected in the size of the appropriation for small businesses, which still may not be enough. From Bloomberg

Providing fast relief to small-business owners and helping them keep their workers on payroll is central to shore up the economy. It’s a crucial sector that employs almost half of the private workforce and has been among the hardest hit by lockdowns across the country as part of efforts to slow the coronavirus pandemic. The number of Americans filing for unemployment benefits surged to a record 3.28 million [the third week of March 2020], more than quadruple the previous high in 1982, according to Labor Department figures released [on March 26, 2020].

So, what can desperate small business owners, independent contractors, and self-employed individuals expect from the Paycheck Protection Program stimulus bills? And how can you see if you qualify? Here’s a full overview. 

What is the Paycheck Protection Program? (Overview.)

The Paycheck Protection Program originally authorized $349 billion (in the first round of funding; $310 billion was added for round 2, and an additional $285B in funding was obtained for 2021 so far) in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. All loan terms will be the same for everyone.

The loan amounts will be forgiven as long as:

  • The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8 (or 24) week period after the loan is made; and
  • Employee and compensation levels are maintained (there are KEY EXCEPTIONS to this rule for 2021; see below)

Payroll costs are capped at $100,000 on an annualized basis for each employee. Not more than 40% (previously 25%) of the forgiven amount may be for non-payroll costs.

Loan payments will be deferred until borrowers receive notification from the SBA of their PPP loan forgiveness approval, or 10 months after the last day of the covered period (previously payments were deferred for 6 months).

How much money does the $2 trillion CARES Act allocate to small businesses?

About $350 billion via the Paycheck Protection Program was loaned out during the first round of PPP funding, and an additional $310 billion in the second round in April 2020, with an additional ~$300 billion is dedicated to PPP so far for 2021. We expect there may be even more extensions as the suffering of America’s small businesses continues into 2021. 

How will small businesses get access to federal stimulus money from the Paycheck Protection Program?

  • Through loans and grants funded by Congress and administered by the U.S. Small Business Administration.
  • The SBA has approved a network of hundreds of lending institutions to make these loans directly.
  • Private companies, like Womply, are facilitating direct connections to SBA-approved lenders to expedite the process for small businesses that need funds ASAP. 

Read more: Who can help me apply for a PPP loan?

Go deeper: PPP loan W2 and 1099 applicants

How do I know if my small business qualifies for a loan or grant under the Paycheck Protection Program?

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

For the PPP program, the SBA’s affiliation standards are waived if your business:

  • Is in the hotel and food services industries (click here for NAICS code 72 to confirm)
  • Is a franchise in the SBA’s Franchise Directory (click here to check)
  • Receives financial assistance from small business investment companies licensed by the SBA. (The SBA may release additional guidance on this point.)

Some businesses may be disqualified due to rare circumstances, such as companies that are majority owned by private venture capital investors. 

Go deeper: Do I still qualify for a PPP loan if i started my business in 2021?

How much stimulus money can my business get through the Paycheck Protection Program?

  • Loans can be for up to two months of your business’s average monthly payroll costs from the last year plus an additional 25% of that amount, capped at $10 million for first-draw loans and $2 million for second-draw loans in 2021.
  • If you are a seasonal or new business, you will use different applicable time periods for your calculation (check with your SBA-approved lender for details).
  • Please note that payroll costs will be capped at $100,000 annualized for each employee.

What interest rate will I get on an emergency loan through the Paycheck Protection Program?

All loans will have a 1% interest rate (the government modified this from 0.5% on 4/3/2020), with deferred until borrowers receive notification from the SBA of their PPP loan forgiveness approval, or 10 months after the last day of the covered period (previously payments were deferred for 6 months).

You may also like: Does PPP loan require credit check?

Do I have to pay the money back to the government?

It’s possible to have some or all of your PPP loan 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 over the 8 (or 24) weeks after getting the loan. 60% (previously 75%) of the funds must be spent on payroll to achieve full loan forgiveness.

You will also owe money if you do not maintain your staff and payroll (see exceptions for 2021 below).

  • 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.

Go deeper: Do you have to pay back a PPP loan?

When can I apply for an emergency loan?

The program will continue through May 31, 2021 while funds last, but we strongly recommend applying ASAP due to high demand and loan processing time. All applications must be submitted to SBA by June 1, 2021. After that date, the SBA will not accept any new applications but will only be processing applications that have already been submitted to SBA.

If you’re wondering “who can help me fill out PPP loan,” Independent contractors, sole proprietors, gig workers, and self-employed individuals can benefit from a simplified application process when they apply via PPP fast lane.

What if I already have an SBA loan?

You can still get a forgivable emergency loan from the PPP initiative. 

Do I have to offer collateral or personal guarantees to get an emergency loan?

  • No, you don’t have to provide collateral or personal guarantees for PPP loans. These funds are being offered on good faith due to the COVID-19 crisis.
  • However, the government will prosecute anyone who uses a PPP loan for fraudulent purposes.

How do I apply for a small business stimulus loan if my business has been impacted by COVID-19?

You need to find an SBA-approved lender who is still accepting applications. The revised deadline is May 31, 2021.

What if I couldn’t keep my employees, they quit, or refused to be rehired? Can I still qualify for loan forgiveness?

For 2021 there are certain exceptions to the “maintaining employees levels and compensation” rule.

If you received a PPP loan of $50,000 or less

If you received a PPP loan that was $50,000 or less, you are exempt from having to maintain your employee and compensation levels in order to receive loan forgiveness. Your loan must still be spent on approved costs and you will still need to document that you spent at least 60% of your funds on payroll expenses. 

When you’re ready to apply for loan forgiveness, you will want to contact your lender to receive the simplified loan forgiveness form. 

An employee quit, retired, or was fired (with just cause), or refused your offer to be rehired

If you couldn’t maintain employee levels due to someone quitting or being fired with just cause, then you can still qualify for full loan forgiveness. You can also get full loan forgiveness if you have written proof that you offered to rehire employees who refused your offer (if your offer was at their former pay). But, it’s very important that you document each of these instances so that you can verify this when you apply for loan forgiveness. 

You’ll need documentation to explain why your employee was fired or other supporting documents to verify an employee’s termination or refusal to be rehired.

If I apply for my first draw PPP loan after December 27, 2020, do I still need to restore payroll or headcount to previous levels in order to receive forgiveness?

No. PPP Loans received after December 27th, 2020 are not required to “rehire” any employees in order to receive forgiveness. You will, however, need to maintain current payroll levels during the forgiveness period. (Exceptions to this would include employees who resign or are terminated with cause).

Go deeper: read about how to calculate your average monthly payroll and PPP loan request amount

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