This initiative provides 100% federally guaranteed loans to help companies (and others, includingsole proprietors, self-employed individuals and independent contractors) maintain payroll during this crisis. Importantly, these loans may be forgiven if borrowers maintain their payrolls during this emergency or restore their payrolls afterward.
Companies can borrow up to $10 million to cover ALL payroll related expenses (salaries, wages, commissions, health, benefits, incentives, etc.). Additionally, funds can also be used to pay interest on mortgages, rent, and utilities. There is no obligation to repay funds spent on payroll costs and other qualified expenses. However, payroll costs are capped at $100,000 on an annualized basis for each employee. It is anticipated that at least 75% of the forgiven amount (non-taxable grant) must have been used for payroll costs, and not more than 25% of the forgiven amount may be for non-payroll costs.
This program covers eight (8) weeks of payroll time between the retroactive dates of February 15, 2020 and June 30, 2020. Any excess expenses will go into an EIDL if you applied. Here is a formula for calculating an estimated payroll cost: 12 months of payroll expenses divided by 12 equals monthly average multiply by 2.5.
There is no SBA online loan application for PPP, but the loans are federally insured. SBA has a network of at least 1,800 approved lenders to process small business loans. Applicants are encouraged to contact their personal or business banker. If your bank is not an SBA-approved lender or you do not have an existing banking relationship, you can contact the SBA
to find one. Banks and credit unions may require an account to be set up.
Below are the Terms & Conditions of the PPP:
- Eligible Businesses in existence on January 31, 2020:
All businesses with fewer than 500 employees
Independent contractors (1099 individuals)
- Loan Amount: Up to $10 million (SBA decides how much they will loan)
- Loan Forgiveness: Proceeds used for payroll costs and other designated business operating expenses in the 8 weeks following the date of loan origination (between the retroactive date of February 15, 2020 through June 30, 2020)
- Interest Rate: 0.5%
- Term: 2 years
- Payment Deferment: First payment will be deferred for six (6) months
- 100% guarantee by SBA
- No collateral
- No personal guarantees
- No borrower or lender fees payable to SBA
When can I apply?
- Starting April 3, 2020, small businesses and sole proprietorship can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.
- Starting April 10, 2020, independent contractors and self-employed individuals can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.
How to Apply?
Below is a the list of documents you will need to apply for a PPP loan: