UPDATED April 16, 2020 — In early April, Congress passed the Paycheck Protection Program (PPP), providing for $349 billion in forgivable loans designed to provide a direct incentive for small businesses to keep their workers on the payroll. Today, the U.S. Small Business Administration announced it had approved 1,661,397 loans, exhausting the program’s allotted funds. It can’t accept or approve new applications unless Congress signs off on additional funding, which at this point seems unlikely before early May. 

If your loan application has been approved, your money is likely on the way: Lenders are required by the Treasury Department to disburse funds within 10 days of your application’s approval. 

If you have not yet applied but would like to, talk with your business lender about other local, state, and federal stimulus programs that might be right for your business. And continue to compile the business documentation required for PPP eligibility, as there may be additional funds allocated to this program in the coming weeks.

Original Guidelines for PPP

Download a copy of the  PPP borrower application form here.

You can apply for PPP funds through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Consult with your local lender as to whether it is participating in the program. 

Who’s Eligible to Apply?

The following organizations affected by Coronavirus (COVID-19) may be eligible now:

• Small businesses with fewer than 500 employees
• 501(c)(3) non-profit organizations
• 501(c)(19) veterans organizations
• Tribal businesses
• Any business with a NAICS Code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location
• Sole proprietors, independent contractors, and self-employed people (starting on April 10, 2020)

Loan Details

The maximum loan granted from the PPP will be equal to 2.5 times the average monthly payroll costs for the previous calendar year, up to $10 million. Payroll costs only apply to annual salaries up to $100,000. And your payroll calculations can include only employees whose principal place of residence is within the United States.

If you are self-employed, you can claim your wage, commission, income, net earnings from self-employment or similar compensation, up to $100,000 a year. Work with your accountant or banker to confirm which income qualifies.

Loan Forgiveness

And here’s the interesting part: The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities. At least 75% of the forgiven amount must have been used for payroll. Loan payments will also be deferred for six months. One loan will be granted per business, and a taxpayer identification number (TIN) is required to apply. No collateral or personal guarantees are required. Neither the government nor lenders will charge small business any fees. The PPP loan has a maturity of 2 years and an interest rate of 1%.

Businesses will need to submit a request for forgiveness to the lender that services their loan. According to the U.S. Treasury, the request must include documents verifying employees and pay rates, as well as what the loan money was used for. The amount of loan forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease. 

Apply Now

Since the PPP application period opened on April 3, some banks have already found themselves overwhelmed by demand. And the SBA platform lenders use to process applications has also buckled under the strain of so many applications. Keep in mind that PPP has limited funding available, and loans are granted on a first-come-first-served basis. Congress is already discussing allocating additional funds to this and other small-business loan programs.

Although the program is open until June 30, the Treasury says small business owners should “apply as quickly as you can” due to funding caps and the time needed to process loans. There have already been some roadblocks, including banks requiring applicants to be previous loan customers, but some are now easing those requirements.