Paycheck Protection Program
This page will be updated continuously to reflect the most recent information. This page was last updated on April 7, 2020.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act included the Paycheck Protection Program (PPP), a loan program that helps qualifying small businesses and private non-profits retain their workforce during the COVID-19 pandemic by providing zero-fee loans of up to $10 million to cover payroll and other operating expenses. Up to eight weeks of payroll, mortgage interest, rent, and utility costs can be forgiven. Small businesses are able to apply if they were economically impacted by COVID-19 between February 15, 2020 and June 30, 2020. Loans will be available through June 30, 2020. To have the full eight weeks of allowable costs forgiven, businesses should apply before May 5, 2020 to ensure all forgivable costs are incurred before June 30, 2020.
Eligible small businesses, sole proprietors and non-profits may begin to apply for the program on April 3, 2020. Independent contractors and self-employed individuals may begin to apply for the program on April 10, 2020.
Who is eligible for PPP loans?
- Small businesses, as well as any business, 501(c)(3) nonprofit organization, 501(c)(19) veterans organization, or Tribal business or corporation owned wholly or in part by one or more Tribal Government Act that has fewer than 500 employees, or the applicable size standard in number of employees (not in millions of dollars) for the North American Industry Classification System (NAICS) industry as provided by SBA, if higher. A link to the size standards is found here.
- Individuals who operate a sole proprietorship, independent contractors and eligible self-employed individuals.
- Any business concern that employs no more than 500 employees per physical location of the business concern and that is assigned a NAICS code beginning with 72, for which the affiliation rules are waived.
- Affiliation rules are also waived for any business concern operating as a franchise that is assigned a franchise identifier code by SBA, and company that receives funding through a Small Business Investment Company.
All businesses and entities must have been in operation on February 15, 2020 to be eligible for a PPP loan.
How will PPP loans be forgiven?
Loans will be forgiven if loan proceeds are used to cover payroll costs, most mortgage interest, rent and utility costs over the 8-week period after the loan is made. Employee and compensation levels must be maintained to receive loan forgiveness. Due to likely high subscription, SBA and Treasury advise borrowers that, in order for their loans to be fully forgiven, they should use at least 75% of the loan amount for payroll costs. This means that not more than 25 percent of the forgiven loan amount should be used for utilities, rent or mortgage interest payments.
What costs can I cover with PPP loan proceeds?
Payroll costs including:
- Compensation including salary, wages, commissions or payment of cash tips (these are capped at $100,000 on an annualized basis for each employee/owner);
- Employee benefits including costs for vacation, parental, family, medical or sick leave, allowance for dismissal or separation, payments required for the provisions of group health care benefits including insurance premiums, payment of any retirement benefit;
- Payment of State and local taxes assessed on compensation of employees; and
- For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.
Loan proceeds may also go towards interest on mortgage obligations incurred before February 15, 2020, rent (under lease agreements in force before February 15, 2020) and utilities (service must have begun before February 15, 2020).
Where can I apply for a PPP loan?
Entities can immediately apply through any existing SBA 7(a) lender, any federally insured depository institution, federally insured credit union and farm credit institution participating in the program. The Department of Treasury will oversee authorization of new lenders, including non-bank lenders. To find a participating lender near you, please click here. Prospective borrowers are encouraged to contact their financial institutions to check if they are offering PPP loans.
What documents do I need to apply for a PPP loan?
Prospective borrowers will have to complete the Paycheck Protection Program loan application here and must also include their payroll documentation to be submitted to their lender. Their lender must process the loan by June 30, 2020. Borrowers are encouraged to apply as quickly as possible so lenders have time to process the loan.
How do I request PPP loan forgiveness?
Borrowers can submit a request to the lender servicing their loan. The request must include documentation verifying the number of employees on payroll and their pay rates, including IRS payroll tax filing and State income, payroll and unemployment insurance filings. Requests must also include documentation verifying payments on covered mortgage obligations, lease obligations and utilities. The request must be certified by a representative of the borrower’s business or an organization that is authorized to certify that the documentation provided is true and the amount being forgiven was in accordance with the program’s requirements. Lenders must make a decision within 60 days.
What are the terms of PPP loans?
For loan proceeds that are not forgiven, there will be a 1% fixed interest rate. All payments will be deferred for six months, but interest will accrue over this time period. No collateral or personal guarantee is required, and there will be no prepayment penalties or fees. Congress allowed the maximum loan term to be 10 years, but the Treasury Department has issued guidance that the loan term to be two years. Borrowers may not receive more than one PPP loan.
For more information, please click here to visit the SBA’s PPP resource page or here for the U.S. Department of the Treasury’s resource page on PPP. For further information on all of the CARES Act changes for small businesses, please click here.