The CARES Act established the Paycheck Protection Program intended to provide eligible small businesses with eight weeks of cash-flow assistance as a direct incentive to keep their workers on the payroll. The loans are 100 percent federally guaranteed loans from the U.S. SBA. The amount any small business is eligible to borrow and be forgiven is 250 percent of their average monthly payroll expenses, up to a total of $10 million.
Who Can Apply
The following entities affected by COVID-19 are eligible to apply:
- Private small businesses having fewer than 500 employees or that meet SBA industry size standards, whichever is greater;
- Sole proprietors, independent contractors, and self-employed persons
- must have filed or will file a Form 1040, Schedule C for 2019* and payroll costs per employee are limited up to $100,000 annualized)
- SBA will issue additional guidance for those individuals with self-employment income who: (i) were not in operation in 2019 but who were in operation on February 15, 2020, and (ii) will file a Form 1040 Schedule C for 2020.
- Private non-profits, including faith-based entities (sec. 501(c)(3) of the Internal Revenue Code (IRC)), veteran organizations (sec. 501(c)(19) of the IRC), or Tribal business concerns (sec. 31(b)(2)(C) of the Small Business Act) that meet the SBA size standard; and
- Any business with a NAICS Code that begins with 72 (Accommodations and Food Services) the 500-employee rule is applied on a per physical location basis.
- Businesses must have been actively operating on February 15th, 2020.
- The principal place of residence must be in the United States.
The maximum loan amount is the lesser of 2.5 times the business’ average monthly payroll costs based on the previous 12-month period, or $10 million. Payroll costs are capped at $100,000 annualized for each employee (ex. $100,000 maximum individual amount / 12 months * 2.5 = $20,833).
Applicants are responsible for determining payroll costs and attest under perjury eligibility.
Payroll costs include:
- Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee);
- Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit;
- State and local taxes assessed on compensation ; 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.
Operating expenses include:
- Interest on mortgage obligations incurred before February 15, 2020;
- Rent, under lease agreements in force before February 15, 2020; and
- Utilities, for which service began before February 15, 2020.
Average monthly payroll period:
- Existing Businesses: Past 12 months or CY2019
- New Businesses: January 1 – February 29, 2020
- Seasonal Businesses: February 15 or March 1 to June 30, 2019 (To be eligible, must be in operation on February 15, 2020 or 8-week period between February 15, 2019 and June 30, 2019.
Loan Terms & Forgiveness
SBA will forgive loans if all employees are kept on the payroll for eight weeks after getting the loan, and the money is used for payroll, rent, mortgage interest, or utilities.
- At a minimum, 75% of the calculated loan forgiveness amount must have been used for allowable payroll.
- At a maximum, 25% can cover allowable operating expenses.
Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
Any amount of the loan not forgiven will be converted into a two-year term loan with a fixed interest rate of one percent; however, no payments are required for the first six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.
To apply for forgiveness, small businesses must submit documentation regarding the eligible uses of loan funds (payroll costs, mortgage interest, utilities, etc.), a certification that such documents are true and correct, as well the amount to be forgiven, and any other documentation deemed necessary by the SBA to the lender that is servicing your loan.
Deadline and How to Apply
As of April 22, 2020 the PPP was replenished and financial institutions are now accepting new applications at this time based on available appropriations funding. Applicants who have already submitted their applications will continue to be processed.
Businesses can apply for a PPP loan at any lending institution that is approved to participate in the SBA 7(a) lending program. Additional lenders and non-traditional lenders will be approved by the Department of Treasury. This could be the bank you already use or a nearby bank.
You should contact your primary business banker. If your banker does not participate in the program, they can refer you to a local participating bank. You may also find SBA-approved lenders in your area through SBA’s online Lender Match Tool.
If you wish to begin preparing your application, you can download a copy of the PPP borrower application form to see the information that will be requested from you when you apply with a lender.
Additional Rules and Guidance
- Interim Final Rule (effective April 16, 2020) on Business Loan Program Temporary Changes: Paycheck Protection Program.
- Interim Final Rule (effective April 14, 2020) announcing Additional Eligibility Criteria and Requirements for Certain Pledges of Loans for the Paycheck Protection Program. This information is being posted in advance of publication in the Federal Register. The official version will appear in the Federal Register.
- Interim Final Rule (effective April 3, 2020) announcing the Paycheck Protection Program information as posted in the Federal Register.
- Click here for affiliation rules applicable for the Paycheck Protection Program
- Click here for SBA’s table of small business size standards
- Frequently Asked Questions for Lenders and Borrowers
- Frequently Asked Questions for Faith-Based Organizations Participating in the Paycheck Protection Program and Economic Injury Disaster Loan Program
For additional FAQs about the PPP program, click here.
For application status inquiries and/or questions about the loan program:
Please contact the SBA at 1-800-659-2955 (TTY: 1-800-877-8339) or email@example.com.
For assistance with completing an application:
Colorado SBDC disaster recovery specialists provide one-on-one confidential consulting at no cost to help businesses prepare disaster loan applications and assist with other post-disaster challenges. Please note that consultations are taking place via phone call or virtual meeting. Due to the COVID-19 pandemic, we are experiencing high volumes of calls, emails, and requests for consulting. We will work to respond to your request as quickly as possible. We ask that you remain patient during this time and we’ll be in touch with you as soon as possible.