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The Paycheck Protection Program (PPP) officially ended on on May 31, 2021. Compare traditional business loans instead if your company still needs financing.
This emergency loan program offered by the Small Business Administration (SBA) was designed to help small businesses retain employees during the coronavirus outbreak. Rates are fixed at 1% — much lower than a traditional business loan or an SBA disaster loan.
Keep your full staff on the same salary and you could get the full loan forgiven after eight weeks. But even if you lose some staff, you may still be eligible for forgiveness.
A recent executive order and the American Rescue Plan Act expanded eligibility requirements and allowed self-employed borrowers to qualify for more funds.
The Paycheck Protection Program (PPP) offered government-backed loans for businesses that have been affected by the coronavirus outbreak, called a Paycheck Protection Program loan or Paycheck Protection Loan (PPL).
It was created by the Coronavirus Aid, Relief and Economic Security (CARES) Act of 2020 as a way to encourage employers to keep employees on payroll, hire back staff and help cover overhead expenses. It covers eight or 24 weeks of eligible operating costs, starting on February 15th up to December 31st — and you can apply for forgiveness.
Applications were open from April 3rd to August 8th. With the Economic Aid Act passed in late December, a new round of applications opened on January 11, 2021 and will close May 31, 2021.
The PPP is a modification of the SBA 7(a) loan program that works like a combination of a loan and a grant. Generally, you’ll follows these steps:
The SBA warns small business owners to look out the following red flags and scams when applying for a PPP loan:
If you run into a PPP scam, call 800-767-0385 to file a report. Or, fill out a form on the SBA’s Office of Inspector General website.
The Paycheck Protection Program is an emergency loan program that was launched before the SBA and Treasury Department issued clear guidance for lenders and borrowers. As a result, there’s been a lot of confusion for both lenders and borrowers.
While the SBA started accepting forgiveness applications on August 10th, it didn't start processing those applications until October. Small businesses owners might not see forgiveness as soon as they expected.
All businesses must be established before February 15, 2020 and have employees that they reported on payroll tax or contractors reported in an IRS Form 1099-MISC. Your business must also not be in bankruptcy proceedings.
The SBA also expanded eligibility to business owners with a felony criminal past on June 8th. Under a new ruling, the typical five-year look-back period was reduced to one year for business owners with non-financial felonies.
The following types of businesses are eligible, as long as you have fewer than 500 employees or meet SBA size standards for your industry, or meet the SBA’s alternative PPP size standards — whichever is greater:
You can find out if your business meets traditional SBA size standards by using a tool on the SBA website. It varies depending on your industry.
If you don’t meet traditional SBA size standards, you still can qualify by meeting these alternative size standards:
Not necessarily. For PPP applicants, the SBA doesn’t consider affiliate businesses when calculating the size of service industry businesses, franchises or businesses that receive help from a Small Business Investment Company (SBIC).
If you’re an independent contractor or sole proprietor with no employees, you must have had a net profit above $0 on your 2019 or 2020 tax returns to qualify for a PPP loan.
The SBA has a few restrictions on what types of business activity can qualify for a PPP loan.
Generally, if your business doesn’t qualify for an SBA 7(a) loan due to your business’s industry or activity, it also is ineligible for a PPP loan.
SBA loan requirements and restrictions
Yes — even if they don’t provide secular services. Places of worship such as churches, synagogues, mosques and temples don’t need to be a registered nonprofit, though they have to meet 501(c)(3) requirements.
If your organization is affiliated with another larger organization that is essential to your organization’s religious teachings or structure — such as a diocese — affiliate rules don’t apply when calculating business size.
Everyone with a 20% ownership stake in the company or higher must also meet a few criteria:
The SBA doesn’t set any specific credit requirements, but it also doesn’t prohibit lenders from considering your credit score.
However, since it’s fully guaranteed by the SBA and comes with forgiveness, it’s likely your credit score won’t factor into your application as much as it would with other SBA loans.
The SBA and Treasury Department issued clarifications for businesses that might fall into a gray area.
Technically, Paycheck Protection Loans run as high as $10 million, but the maximum you can borrow is one month of eligible payroll costs multiplied by 2.5.
To learn more about how much you can borrow, read our guide to calculating average monthly payroll costs. We’ve even included a calculator based on the SBA’s formula to make the process even easier. But it’s up to the borrower to accurately calculate the loan amount, so you’ll need to back up your calculation with relevant tax and payroll documents.
Calculating your average monthly payroll costs is a little different if you’re self-employed, an independent contractor or a sole proprietor. Read our guide to applying for a PPP loan as a self-employed borrower for a step-by-step process.
PPP loan stats as of June 30, 2020
You can apply through a private lender that offers PPP loans. Most lenders that work with small businesses are offering this loan — not just SBA lenders. However, you might hit fewer snags if you work with a lender that’s already worked with the SBA. Read our step-by-step guide to filling out the application for help getting started.
The Treasury Department estimated that the turnaround time would be 24 to 48 hours — or even faster. However, some lenders are skeptical that they’d be able to process applications that quickly, especially during the first few days of the program. But it’s still likely faster than the months it takes to receive funds through a typical SBA 7(a) loan.
“The loans should be approved more quickly than previous SBA-backed loans since the process will be handled entirely by the lender,” Michael W. Myhre, the CEO of the Florida Small Business Development Center (SBDC) Network, told Finder. “There is no separate review being conducted by the SBA.”
The Paycheck Protection Loan is meant to cover payroll and some operating costs, including:
While these costs might be legitimate uses of the funds, not all are eligible for reimbursement.
You can qualify for 100% forgiveness on your PPP loan if you spend all of the funds on eligible expenses eight weeks after your lender disburses the loan. At least 60% of your forgiveness amount must be based on eligible payroll costs. Only 40% can cover other operating expenses.
If you laid off staff or reduced salaries between February 15th and April 26th, you have until June 30th to reverse those changes — otherwise, you’ll only qualify for a reduced amount of forgiveness.
How to get 100% forgiveness on your PPP loan
Here are a few ways to make the most of this new SBA loan program:
From tax credits and deferred payroll taxes to grants and SBA loan subsidies, here are a few more benefits for small businesses offered by three stimulus packages:
15+ benefits and programs inside the coronavirus stimulus package
The SBA Paycheck Protection Program can help your business cover expenses during the coronavirus outbreak at no immediate cost. And it has more flexible eligibility criteria than other SBA guarantee programs. Read about other financing available to you with our guides to business loans and grants available during the pandemic, as well as other types of SBA loans available to you.
You can also stay up to date on ever-changing coronavirus news with our hub.
Finder.com received a PPP loan in May 2020.
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