The Paycheck Protection Program (PPP) is a lot less complicated compared to other loans backed by the Small Business Administration (SBA). There are fewer requirements, lenders process and fund the loans on their own, and it’s more widely available.
Paycheck Protection Program Flexibility Act makes it easier to qualify for forgiveness
The Paycheck Protection Program Flexibility Act was passed by Congress on June 3, 2020, making it easier for businesses to qualify for full forgiveness.
Under the Act, businesses now have up to 24 weeks to spend the money to qualify for forgiveness — extended from the original eight weeks. It also gives businesses more flexibility in how they use the funds — now only 60% of the funds needs to be used for payroll and 40% can be spent on other costs.
Are lenders still accepting PPP applications?
Yes, the deadline to apply for a loan through the Paycheck Protection Program is extended to August 8, 2020. This is because around $130 billion of funds was left over when the original deadline came on June 30.
However, this loan program has been notoriously slow, with many businesses still waiting to hear back about a decision. If you need financing now, compare other loans for businesses affected by the coronavirus or see if your business qualifies for a COVID-19 grant. You can also explore these 7+ alternatives to SBA loans to help increase cash flow.
Step 1: Check the application dates
When you can apply depends on what type of business you have:
- Small businesses, nonprofits and sole proprietors: April 3, 2020
- Independent contractors and self-employed individuals: April 10, 2020
Be prepared to get your application in as close to that date as possible. The SBA has limited funding, and the PPP is already extremely popular. The later you apply, the more likely you’ll have to wait weeks to see your funding — or not get accepted at all.
Step 2: Make sure you qualify
Review the requirements for the PPP to make sure your business makes the cut. At a minimum, your business must meet the following criteria:
- Established before February 15, 2020
- Either have fewer than 500 employees, or meet traditional or alternative SBA size standards — with some exceptions for the service industry and franchises
- Be a small business, nonprofit, tribal organization, veterans’ organization, sole proprietorship or independent contractor
- Not currently in bankruptcy proceedings
Owners with a 20% stake in the company or more must be US citizens or permanent residents and current on all federal loans. And as of June 8, 2020, the government revised the look-back period for felony criminal histories. Now, you can qualify for a PPP loan if you haven’t been convicted of a non-financial felony in the last year — reduced from the last five years.
There’s a chance some lenders might have additional requirements, but they likely won’t be as strict as a typical SBA loan.
Step 3: Compare lenders
Most small business lenders are offering PPP loans. Since rates, terms and loan amounts are the same regardless of the lender you use, consider factors like additional eligibility requirements, documentation required and potential turnaround times.
While you can find a PPL with non-SBA lenders, you’ll likely hit less snags with a lender that has experience working with government-backed business loans. The SBA also released a new Lender Match tool on its website that can help you find a lender to apply for a PPL through.
Apply for a PPP loan
Here’s a list of online lenders that offer PPP financing. Just keep in mind that these lenders don’t offer SBA disaster loans — you’ll need to apply for those directly on the Small Business Administration’s disaster website.
Step 4: Prepare for the application
If you don’t see an application on the lender’s website, call customer service to find out how to apply and what documents you need to upload. At a minimum, you’ll likely need to provide verification of payroll costs — such as a W-2 — as well as 1099 forms and utility bills.
If your business has more than one owner with at least a 20% stake in the company, come up with a plan so you can each fill out the appropriate sections of the application.
Step 5: Fill out the application
The SBA requires all lenders to use the same information for PPP loans, though the format might change. These steps show you how to. It’s only two pages long and is less complicated than most SBA loan applications.
Once you have the form handy with you, follow these steps to apply:
1. Provide basic information about your business.
Complete the box at the top of the application with the following information:
- Business type. Check the box indicating the type of business your business is registered as.
- Business legal name. Write the name your business is legally registered under — for example, Jon Doe Media, LLC.
- DBA or tradename, if applicable. If your business goes by a different name than its legal name, write that here — for example, Jon Doe Media.
- Business address. Write the street address of your business’s main location. If you have a service industry business with multiple locations, write the address for the location you want to fund.
- Business TIN (EIN, SSN). Fill in your business’s tax identification number (TIN). If you’re an independent contractor or self-employed individual, provide your employee identification number (EIN) or Social Security number (SSN).
- Business phone. Enter the phone number you want to be contacted at to receive status updates or questions about your application.
- Primary contact. Write the name of the person the lender should reach out to about the application.
- Email address. Provide an email address where the lender or SBA can reach you about your application.
2. Calculate your loan amount and purpose.
Complete the second box with the following information:
Average monthly payroll
If you’re self-employed, check out our specialized guide.
Enter the average amount your business spent on eligible payroll costs over the last year. You can use our in-depth guide to calculating your loan amount to better navigate this step.
- New businesses. Use the average payroll cost between January 1, 2020 and February 29, 2020.
- Seasonal businesses. Use the average monthly payroll cost between either February 15 or March 1, 2019 and June 30, 2019.
Multiply your average monthly payroll by 2.5 and write the amount next to the dollar sign — if you don’t have an Economic Injury Disaster Loan (EDL) and move on to the number of jobs. If it’s higher than $10 million, write $10 million — that’s the maximum you can borrow.
EIDL and net of advance
Subtract any EIDL advance — if applicable — you’ve received from the balance of any EIDL loan that you’re using to cover payroll expenses. Then add the result to the number you calculated in the previous step and enter it next to the dollar sign.
Number of jobs
Write in the number of full-time, part-time and other employees you have on payroll. Don’t include independent contractors.
Purpose of the loan
Select all costs you intend to cover with this loan:
- Rent or mortgage interest
If you plan on using it for other costs, check Other and write in an explanation.
3. Provide basic information about owners.
Under the box labeled Applicant Ownership, fill in the following information for everyone with at least a 20% stake in the company. If your business is owned by a trust, provide information for the trustor.
- Owner name
- Title in the company
- Percentage of ownership
- Tax identification number, employer identification number or Social Security number
- Personal address
If there are more than two owners, attach a separate sheet with their information.
4. Answer questions about the business.
Check Yes or No for each question in this section. If you answer Yes to the first two questions, you aren’t eligible for this loan.
- Question 1. If your business or any owner with at least a 20% stake in the company has been banned from participating in a federal program or is currently in bankruptcy proceedings, you’re ineligible for this loan. Otherwise, check No.
- Question 2. If your business or any owner is currently delinquent or has defaulted on a federal loan in the past seven years — including student loans — you aren’t eligible for this loan. Otherwise, check No.
- Question 3. If your business is managed by another business, check Yes and attach a list of all affiliated businesses with a brief description — including the number of employees — labeled Addendum A. Otherwise, check No.
- Question 4. Check Yes if your business has received an SBA Economic Injury Disaster Loan due to the coronavirus outbreak between January 1, 2020 and April 3, 2020. Attach a sheet with details including the loan balance, rate and term, labeled Addendum B. Otherwise, check No.
5. Answer questions about the owners.
Each owner must answer and initial the following questions — you can use separate applications and send them in together. Or you can have an authorized representative and sign the application on all owner’s behalves.
- Question 5. If you’re facing any kind of criminal charges or are incarcerated, your business isn’t eligible for this loan. Otherwise, check No and initial your response.
- Question 6. If you’ve been convicted of, pleaded guilty or nolo contendere to, gone on pretrial diversion or faced any type of parole or probation for a crime against a minor in the past seven years, your business isn’t eligible for the loan. Otherwise, check No and initial your response.
- Question 7. Check your legal status in the US and initial your response. If you aren’t a US citizen or permanent resident, your business isn’t eligible for this loan.
6. Read and sign representations, authorizations and certifications.
Like with the previous section, all owners must complete this final section separately. Each owner must read through the representations and authorizations and write their initial next to each certification.
7. Sign and date the application.
Review the application for inaccuracies, and make sure each owner signs, dates and writes their title on their part of the application.
Then, send the application to the person who is the business’s main representative to sign, date and write their title on each application form.
Follow your lender’s directions for submitting the application form, along with any required documents.
Step 6: Wait for a decision
Since it’s a new program, application processing times will vary depending on the lender and the volume of applicants. Lenders are generally prioritizing PPL applications above others, but many have mentioned feeling unprepared to launch the program so quickly. It may take as little as one day or as long as a few weeks to get a response.
Step 7: Receive your funds
If you’re approved, your lender will typically send the funds to your business’s bank account by ACH transfer. This can take between one to three businesses to process. If you’re borrowing from a lender where you already have an account, you may be able to get your money the same day you’re approved.
Twenty-four weeks after the funds are disbursed, you can apply for forgiveness.
3 steps to take after getting a Paycheck Protection Loan
Make the most of your Paycheck Protection Loan by taking these steps:
- Rehire staff. If you had to lay off staff or reduce salaries, use the loan to bring them back on — this will increase the amount of forgiveness you’re eligible for.
- Keep detailed records. You’ll need to provide documentation for all eligible expenses when you apply for forgiveness — otherwise those costs won’t count toward forgiveness.
- Stay in touch. Reach out to your lender with any questions you have about the loan and forgiveness. Since this is a new program, policies are likely to change.
Want to learn about other options? Read our guide to business loans during the coronavirus to find out what else is available to you.
Frequently asked questions
Finder.com received a PPP loan in May 2020.
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