The following video contains a brief overview of the Payroll Protection Program. Frequently asked questions regarding the program are below the video.
The application deadline for small businesses to apply for a loan through the Payroll Protection Program (PPP) has been extended from June 30, 2020 to August 8, 2020. There are still funds available in the program which gives small businesses that have not previously applied for a PPP loan almost 6 more weeks to apply.
The PPP loans are part of the federal CARES Act enacted to assist businesses affected by the COVID-19 pandemic.
What is the Payroll Protection Program?
If you aren’t familiar with the Payroll Protection Program (or PPP), it’s a loan designed to encourage and provide an incentive to small businesses for keeping their employees on payroll. If the funds provided by a PPP loan are used toward payroll costs or other qualified costs of doing business (such as mortgage payments, rent, utilities, etc) the Small Business Association (SBA) will forgive part or all of the loan provided, essentially turning the loan into a grant for the small business.
Who is Eligible to Participate in the Payroll Protection Program?
Small businesses with less than 500 employees are eligible to apply for a PPP loan.
How do I apply for a PPP Loan?
To apply, you’ll need to work with a participating lender. You can check with your existing bank or credit union to see if they are participating in the program.
Additional options for lenders are listed below. Note we have no affiliation with these lenders.
What is the maximum loan amount a small business is eligible for?
The maximum loan amount is equal to 2.5 times your regular monthly payroll cost. This figure is calculated using 2019 payroll data.
What items are included in payroll cost?
- Gross wages (any pay to employees such as regular salary and hourly wages, bonuses and commissions, etc) up to $100,000 on an annualized basis for each employee
- Employer contributions to a qualified retirement plan.
- Employer contributions to a qualified healthcare plan.
- Employer paid state and local taxes (such as state unemployment tax)
How much of the loan must be used toward payroll cost in order to be eligible for forgiveness?
To be eligible for forgiveness, at least 60% of the forgiven amount must have been used for qualified payroll costs. The additional loan amount should be used toward other business expenses such as mortgage, rent, and utility payments.
Can you provide more information about loan forgiveness?
Loan forgiveness is based on the small business maintaining the same number of FTE (full time equivalent) employees and also maintaining pay levels consistent to what they were prior to the loan origination date. If a small business reduces their full time employee count or reduces pay rates by more than 25%, their loan forgiveness amount may be reduced.
How long do I have to use the funds from the loan in order to receive forgiveness?
If you received your PPP loan prior to June 5, you have the option to use an 8 week period or a 24 week period for forgiveness. Note: The options are only 8 weeks or 24 weeks, you can’t choose another amount in between the two. If you received your loan after June 5, 2020, you must use a 24 week period for your covered period.
The borrower (small business) has the choice to use either check dates or pay period dates within their 8 week or 24 week period.
When do I need to have my employee count restored by in order to receive forgiveness?
If you reduce your FTE headcount during the covered period, you have until December 31, 2020 to rehire employees who were displaced during the loan period or to hire a qualified replacement.
Are there any exceptions for businesses who are unable to restore their FTE headcount by December 31, 2020?
Yes. There are a few safe harbors available to employers if the employer can document that they were unable to rehire an employee or a similarly qualified employee, that their was an inability to return to the same level of business activity for the company based on requirements or guidance issued by the Secretary of Health and Human Services, the Director of the CDC or OSHA, or an employee voluntarily resigns or requests a reduction in hours. It’s imperative that small businesses who are unable to return to their previous FTE headcount keep detailed documentation as to the reasoning.
How do you apply for loan forgiveness?
Borrowers will need to work with their lenders to determine which loan forgiveness application form they will need to complete. Lenders will be able to provide borrowers with specific information that will be needed for the loan forgiveness application.
What if a business doesn’t use 60% or more of the loan amount toward payroll costs?
If a small business is not granted forgiveness, the amount given will be treated as a loan. PPP loans have an interest rate of 1% with no collateral or personal guarantees required. Loans issued prior to June 5, 2020 have a maturity of 2 years and loans issued after June 5, 2020 have a maturity of 5 years. Loan payments will be deferred for six months. Lenders will have more information regarding the details of the loan.