Frequently asked questions about the Paycheck Protection Program

The Small Business Administration (SBA) and the U.S. Department of the Treasury authorized Paycheck Protection Program (PPP) loans to help small businesses pay employees and cover eligible expenses. The PPP consists of billions in government-backed loans and is part of the CARES Act.


Regulations and guidance from the SBA and the U.S. Department of Treasury on the PPP are evolving rapidly. Please refer to the latest guidance from the SBA and Treasury to confirm current program rules and how they apply to your particular situation.

What is in the new COVID relief package?

Congress recently passed The Coronavirus Response and Relief Supplemental Appropriations Act of 2021, a $900 billion COVID relief package to deliver the second round of economic stimulus for individuals, families, and businesses. The Act was signed into law on December 27, 2020. The relief package includes an additional $284.45 billion in funding for first-time and second draw PPP loans to help small businesses.

In addition to providing funds for first-time borrowers, the new legislation provides small businesses the opportunity to apply for a second PPP loan if they have fewer than 300 employees and can show a reduction of at least 25% in revenue in 2020 compared to their 2019 revenue (in addition to other requirements). The maximum loan amount for PPP second-time borrowers is $2 million. Additionally, borrowers whose PPP loans are forgiven are allowed deductions on their taxes for otherwise deductible expenses paid with the proceeds of a PPP loan.

The law creates a further simplified PPP loan forgiveness application for loans of $150,000 or less. The PPP borrower will need to sign and submit a one-page certification, and there will be fewer documentation requirements. The law requires the SBA to establish this form within 24 days of enactment. This simplified loan forgiveness process is retroactive and will apply to PPP loans of $150,000 or less, including loans from the first round of funding. The law also expands the list of expenses that are eligible for loan forgiveness.

Who’s eligible?

Who can apply for a Paycheck Protection Program loan?

This depends on if you are applying for a first or second PPP loan. In general, small businesses with fewer than 500 or fewer employees are eligible to apply for a first Paycheck Protection Program loan, and second time borrowers with 300 or fewer employees are eligible to apply for a second loan (among other requirements). Businesses must have been in operation on February 15, 2020 and experienced economic uncertainty are eligible to apply.

For first PPP loans, eligible small businesses and organizations include:

  • Small businesses, 501 (c)(3) nonprofits, 501(c)(19) veterans’ organizations, and Tribal businesses (as described in sec. 31(b)(2)(C) of Small Business Act) that employ no more than 500 employees
  • Certain news organizations or nonprofit public broadcasting entities that employ no more than 500 employees per location
  • Housing cooperatives, eligible section 501(c)(6) organizations, or eligible destination marketing organizations that employ no more than 300 employees
  • Independent contractors, eligible self-employed individuals, and sole proprietors
  • Note: employees of an organization are counted together with any affiliates, if applicable.

For purposes of meeting the 500-employee, 300-employee, or applicable SBA size threshold, some businesses are exempted from applying the SBA’s affiliation rules. Those are:

  • Businesses in the accomodation and food service industries with fewer than 500 employees (or fewer than 300 employees for second draw loans)
  • Franchises that have been assigned a franchise identifier code by the SBA
  • Businesses that have received financial assistance from a Small Business Investment Company (SBIC)
  • Any nonprofit assigned a North American Industry Classification System (“NAICS”) code beginning with 5151 (Television and Radio Broadcasting)
  • Any business concern that is (1) majority owned or controlled by a business concern with a NAICS code beginning with 511110 (Newspaper Publishers) or 5151 (Television and Radio Broadcasting) and (2) employs not more than 500 employees (or 300 employees for second loans) or the applicable NAICS size standard per physical location of such business concern

Some religious organizations may also be exempted from applying SBA affiliation rules for certain relationships that are based on a religious teaching or belief or otherwise constitute a part of the exercise of religion.

Small businesses in certain industries that have over 500 (or 300, as applicable) employees but meet the Small Business Administration’s size standards may still be eligible for a PPP loan.

Also, Applicants will be required to certify that current economic uncertainty makes the loan request necessary to support ongoing operations. Applicants must have been in operation on February 15, 2020, and either paid employees, paid independent contractors, or have been an eligible self-employed individual, independent contractor, or sole proprietorship with no employees.

Who is eligible for a second PPP loan?

Generally, the new law states that PPP borrowers with 300 or fewer employees that can show a reduction of at least 25% in revenue in 2020 compared to their 2019 revenue and that used or will use all of the first loan on eligible costs by the time the second loan is disbursed are eligible for a second PPP loan. Other requirements apply.

Applying for a PPP loan

When can I apply for the Paycheck Protection Program?

Eligible small businesses, sole proprietorships, organizations, independent contractors, and self-employed individuals can now submit applications for a loan under the Paycheck Protection Program through approved SBA lenders.

How long will I have to apply for a Paycheck Protection Program loan?

The U.S. Department of the Treasury suggests applying for the loan as early as possible. Lenders may need time to process applications.

Where can I apply for a Paycheck Protection Program loan?

Applications are processed through approved 7(a) SBA lenders, or any participating federally insured depository institutions, federally insured credit unions, and Farm Credit System institutions. Additional lenders approved by the SBA and enrolled in the Paycheck Protection Program may also participate. Contact your preferred local lender to find out if it’s participating in the Paycheck Protection Program.

See the list of participating lenders.

How much can I request under the Paycheck Protection Program?

First time loans through the Paycheck Protection Program are capped at $10 million per eligible applicant. Second time PPP loans are capped at $2 million. Both caps are applied to the borrower together with any affiliates, if applicable. Loan amounts for eligible applicants are generally determined based on the business’s average monthly qualified payroll costs from calendar year 2020, calendar year 2019, or the precise 1-year period before the date on which the loan is made and will be approximately 250% of that amount (or 350% of that amount for certain second time borrowers). Other calculations are also available to certain seasonal businesses, new businesses, farmers and ranchers, partnerships, and borrowers with income from self-employment.

First time borrowers that wish to apply for a PPP loan can refer to the Paycheck Protection Program Borrower Application Form. Second time borrowers that wish to apply for a PPP loan can refer to the PPP Second Draw Borrower Application. Applicants will be required to provide payroll documentation with their applications.

Second time borrowers that wish to calculate their PPP loan request amounts can refer to the PPP Second Draw Borrower Application.

Can I apply for a second PPP loan if I have received funds in the past?

To receive a second loan, borrowers must have used or will use all of the first loan on eligible costs by the time the second loan is disbursed. Other criteria apply. For example, the new law states that PPP borrowers with 300 or fewer employees that can show a reduction of at least 25% in revenue in 2020 compared to their 2019 revenue (among other requirements) may be eligible for a second PPP loan.

How do I calculate my average monthly payroll costs if I am a first-time borrower?

There are several lookback periods that you may use to calculate average monthly qualified payroll costs. One lookback period you may use is a full calendar year:

  • Aggregate eligible payroll costs from calendar year 2020 or calendar year 2019 for employees whose principal place of residence is in the U.S.
  • Subtract any compensation paid to an employee in excess of an annual salary of $100,000 and/or any amounts paid to an independent contractor or sole proprietor in excess of $100,000 annually
  • Divide the difference in amounts calculated in Steps 1 and 2 by 12. This is your average monthly payroll costs.

 

On the Paycheck Protection Program borrower application form, you will be asked to calculate your maximum loan amount by multiplying your average monthly payroll costs in 2019 or the last twelve months by 2.5 and adding any amount outstanding from an Economic Injury Disaster Loan (EIDL) made between January 31, 2020, and April 3, 2020, that you seek to refinance, less any advance under an EIDL COVID-19 loan.

In addition to using calendar year 2020 or calendar year 2019, borrowers may use the precise 1-year period before the date on which the loan is made. Other calculations are also available to certain seasonal businesses, new businesses, farmers and ranchers, partnerships, and borrowers with income from self-employment. The Treasury Department provides examples beginning on page 9 of the Consolidated Interim Final Rule.

How do I calculate my average monthly payroll costs if I am a second-time borrower?

Second draw PPP loans are calculated as 2.5 (or 3.5 for certain borrowers) times the business’s average monthly payroll cost and are capped at $2 million (together with any affiliates). All businesses can elect to use calendar year 2019, calendar year 2020, or the precise 1-year period before the date on which the loan is made. Other calculations are also available to certain seasonal businesses, new businesses, farmers and ranchers, partnerships, and borrowers with income from self-employment.

What is an included payroll cost?

For both first and second PPP loans, Payroll costs for small businesses include compensation to employees whose principal residence is in the U.S. in the form of:

  • Salary, wages, commissions, or similar compensation
  • Cash tips or equivalent
  • Payment for vacation, parental, family, medical, or sick leave
  • Allowance for separation or dismissal
  • Payments required for the provisions of employee benefits consisting of group health care or group life, disability, vision, or dental insurance including insurance premiums
  • Payment of any retirement benefit
  • Payment of state and local taxes assessed on compensation

 

Payroll costs do not include employee or owner compensation over $100,000/year or compensation for employees who live outside the U.S. Payroll costs also do not include qualified sick and family leave covered by the Families First Coronavirus Response Act. Additional rules may apply to seasonal businesses, new businesses, farmers and ranchers, partnerships, and borrowers with income from self-employment.

What do I need to apply?

Eligible businesses can complete the Paycheck Protection Program loan application or a Paycheck Protection Program Second Draw Borrower loan application and submit it to an approved lender. Applicants are required to provide documentation and information based on their business type. Such documents may include but need not be limited to:

  • Form 941 (or other tax forms containing similar information) and state quarterly wage unemployment insurance tax reporting forms from each quarter in 2019 or 2020 (whichever you used to calculate the loan amount), or equivalent payroll processor records
  • Evidence of any retirement and employee group health, life, disability, vision and dental insurance contributions
  • A payroll statement or similar documentation from the pay period that covered February 15, 2020 to establish you were in operation on February 15, 2020.[WH1]

 

For second loans of more than $150,000, documentation sufficient to establish that the applicant experienced a reduction in revenue, which may include relevant tax forms, including annual tax forms, or, if relevant tax forms are not available, a copy of the applicant’s quarterly income statements or bank statements. (For a second loan of $150,000 or less, applicants must maintain this documentation and provide this documentation by the time the applicant applies for forgiveness or at SBA’s request).

Note that documentation requirements differ for partnerships and self-employed borrowers who file Schedule C or Schedule F.

What does my business need to certify on the first time borrower PPP loan application?

As part of the application, the authorized representative of the applicant will need to make certain certifications in good faith, including (but not limited to) the following:

  • PPP funds will be used to retain employees and maintain payroll; or make payments for mortgage interest, rent, utilities, covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures
  • No more than 40% of the forgiven amount may be for eligible non-payroll costs
  • Current economic uncertainty makes the loan request necessary to support the ongoing operations of the applicant

 

Refer to the full list of certifications on the Paycheck Protection Program Borrower Application Form.

What does my business need to certify on the Second Draw PPP loan application?

As part of the application, the authorized representative will need to make certain certifications in good faith, including (but not limited to) the following:

  • The applicant received a First PPP loan and, before the Second PPP loan is disbursed, will have used the full loan amount only for eligible expenses
  • PPP funds will be used to retain employees and maintain payroll; or make payments for mortgage interest, rent, utilities, covered operations expenses, covered property damage costs, covered supplier costs, and covered worker protection expenditures
  • No more than 40% of the forgiven amount may be for eligible non-payroll costs
  • Current economic uncertainty makes the loan request necessary to support the ongoing operations of the applicant
  • The applicant has realized a reduction in gross receipts in excess of 25% relative to the relevant comparison time period
  • The applicant has not and will not receive another second loan under the Paycheck Protection Program

 

Refer to the full list of certifications on the PPP Second Draw Borrower Application Form.

I laid off my employees. Can I still apply for the Paycheck Protection Program?

Yes, your business will not be disqualified from applying for a PPP loan for this reason. However, reducing employee headcount may affect your forgiveness amount in certain cases.

Self employed applicants

Can an individual with self-employment income apply for a Paycheck Protection Program loan?

Yes. Eligible self-employed individuals, sole proprietors, and independent contractors can apply for PPP loans to cover owner compensation and employee payroll costs (if applicable), among other allowable expenses. If you receive self-employment income, you may be eligible for a PPP loan if:

  • You were in operation on or around February 15, 2020
  • Your principal place of residence is in the United States
  • You filed or will file a Form 1040 Schedule C (or Schedule F, if applicable) for 2019

 

Note: Schedule C filers who were not in operation in 2019 but who were in operation on February 15, 2020, and filed a Form 1040 Schedule C for 2020 may also be eligible.

How are loan amounts determined for individuals with self-employment income who file a Form 1040 Schedule C?

How you calculate your maximum loan amount depends upon whether you employ other individuals. If you have no employees, your maximum loan amount is in part a function of your net profit. Find your net profit amount on your 2019 or 2020 Form 1040 Schedule C on line 31. If line 31 on Schedule C is greater than $100,000, reduce it to $100,000. If line 31 on Schedule C is zero or less, and you have no employees, you are not eligible for a PPP loan.

If you have employees, your maximum loan amount is in part a function of the sum of the following:

  • Net profits on line 31 of your 2019 or 2020 Form 1040 Schedule C (if line 31 on Schedule C is greater than $100,000, reduce it to $100,000. If line 31 on Schedule C is less than zero, set it to zero.)
  • 2019 or 2020 gross wages from your Form 941 on line 5c, column 1 from each quarter plus any pre-tax employee contributions for health insurance or other fringe benefits excluded from Taxable Medicare wages & tips. Subtract any amounts paid to any individual employee in excess of $100,000 annualized and any amounts paid to any employee whose principal place of residence is outside the U.S.
  • Employer health insurance contributions on line 14 of your 2019 Form 1040 Schedule C
  • Retirement contributions on line 19 of your 2019 Form 1040 Schedule C
  • State and local taxes assessed on employee compensation (primarily under state laws commonly referred to as State Unemployment Tax or SUTA from state quarterly wage reporting forms)

 

To estimate your loan amount:

  • Take your net profit amount (in the case of no employees) or your 2019 payroll costs, as computed above (in the case of employees.)
  • Divide it by 12
  • Then multiply it by 2.5
  • For first PPP loans, add the outstanding amount of an Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020 that you seek to refinance, less the amount of any advance under an EIDL COVID-19 loan (because it does not have to be repaid).
  • Cap this amount at $10 million for a first PPP loan, or $2 million for a second PPP loan (applying the cap together with affiliates). This is your maximum loan amount.

I’m an individual with self-employment income and file a Form 1040 Schedule C. What can I use a PPP loan for?

You can use the loan for:

  • Payroll costs consisting of:
  • Owner compensation replacement (calculated based on 2019 or 2020 net profit, using the same year that was used to calculate the loan amount)
  • Employee payroll costs for employees whose principal place of residence is in the U.S. (if you have employees)
  • The following expenses, so long as you claimed or are entitled to claim a deduction for such expenses on your 2019 or 2020 (whichever you used to calculate loan amount) Form 1040 Schedule C:
  • Mortgage interest payments on any business mortgage obligation on real or personal property
  • Business rent payments
  • Business utility payments
  • Interest payments for loans or other debts incurred before February 15, 2020
  • Refinancing an SBA Economic Injury Disaster Loan made between January 31, 2020 and April 3, 2020 for payroll costs.
  • The following expenses (as defined in section 7A(a) of the Small Business Act) to the extent they are deductible on Form 1040 Schedule C:
  • Covered operations expendituresy
  • Covered property damage costs
  • Covered supplier costs
  • Covered worker protection expenditures

 

In addition to the above, at least 60% of your PPP loan must be used for payroll costs. If you use PPP funds for unauthorized purposes, SBA will direct you to repay those amounts. If you knowingly use the funds for unauthorized purposes, you will be subject to additional liability such as charges for fraud.

What documents does a self-employed person who filed a Schedule C need to apply for a PPP loan?

It depends on whether you have employees. If you are self-employed with no employees, you need the following to apply:

  • Your 2019 or 2020 Form 1040 Schedule C. (Whichever you used to calculate the loan amount.)
  • A 2019 or 2020 1099-MISC (whichever you used to calculate the loan amount) showing nonemployee compensation received, invoice, bank statement, or book of record that establishes you are self-employed.
  • A 2020 invoice, bank statement, or book of record to establish you were in operation on or around February 15, 2020.

 

If you are self-employed and have employees, you need the following to apply:

  • Your 2019 or 2020 Form 1040 Schedule C (whichever you used to calculate the loan amount)
  • Form 941 (or other tax forms or equivalent payroll processor records containing similar information)
  • State quarterly wage unemployment insurance tax reporting forms from each quarter in 2019 or 2020 (whichever you used to calculate the loan amount) or equivalent payroll processor records
  • Evidence of any retirement and health insurance contributions, if applicable
  • A payroll statement or similar documentation from the pay period that covered February 15, 2020 to establish you were in operation on February 15, 2020

 

Are loans for self-employed individuals forgivable?

Yes. Loans for self-employed folks can be 100% forgiven, subject to certain requirements.

Can individuals with self-employment income access multiple forms of aid at the same time?

Yes. You can receive multiple forms of aid.

For example, you can receive both an EIDL loan and a PPP loan, but you cannot use them both for the same purpose.

Note that participation in the PPP may affect eligibility for state-administered unemployment compensation or unemployment assistance programs, including the CARES Act Employee Retention Credits.

I’m an individual with self-employment income and file a Form 1040 Schedule C. Do I need to file my taxes before I apply for a PPP loan?

No. But if you decide to use a lookback period for your loan that requires a 2020 Schedule C (e.g., a calendar year 2020 lookback period), and you have not yet filed your 2020 Form 1040 Schedule C, you will need to fill it out and calculate the information needed to apply for a loan.

I’m an individual with self-employment income and file a Form 1040 Schedule C. Can I apply for PPP if my 2019 0r 2020 net profit was negative?

It depends. If you receive self-employment income and do not have employees, you are not eligible for a PPP loan if line 31 on both your 2019 and 2020 Form 1040 Schedule C is zero or less. However, if you receive self-employment income and have employees, you may be eligible for a PPP loan even though your 2019 or 2020 net profit was negative.

How to use federal relief funds

What can I use loans from the Paycheck Protection Program for?

If you receive a loan through the Paycheck Protection Program you can use the loan proceeds for any allowable use, including payroll costs, rent, certain interest payments, and more. However, for the loan to be forgiven in whole, certain requirements must be met:

  • Use 100% of your PPP funds on costs eligible for forgiveness within the required timeframe
  • At least 60% of your forgiveness amount must be attributable to eligible payroll costs
  • No more than 40% of the forgiveness amount may be attributable to eligible non-payroll costs

If you use less than 60% of your PPP funds on eligible payroll costs, you will only be eligible for partial loan forgiveness. Please note that your total forgiveness amount depends on other criteria as well. For example, salary, wage or headcount reductions may reduce the forgivable amount for some borrowers.

For support to meet other needs, check out the Economic Injury Disaster Loan and advance offered by the SBA.

What are the loans terms under the Paycheck Protection Program?

Paycheck Protection Program loan terms include, but are not limited to:

  • Interest rates at 1%
  • You do not need to make payments until you file for forgiveness and the SBA pays your forgiveness amount to your lender or notifies your lender that you are not eligible for forgiveness (“Deferment Period”). If you do not apply for forgiveness within 10 months from the end of the maximum 24-week forgiveness covered period, your Deferment Period will end on the date that is 10 months after the last day of the maximum 24-week forgiveness covered period.
  • Interest continues to accrue on your PPP loan during your Deferment Period.
  • A maturity of 5 years.

Do loans under the Paycheck Protection Program cover paid sick leave?

If you qualify for the Paycheck Protection Program, you can use your loan to pay employer-provided parental, family, medical, and sick leave and other forms of paid time off. Paycheck Protection Program loans don’t cover emergency paid sick and family leave provided by the Families First Coronavirus Response Act (FFCRA).

What can’t I do with my Paycheck Protection Program loan?

If you receive a loan through the Paycheck Protection Program you can use funds to pay for anything you need for your business. However, for the loan to be forgiven in whole, certain requirements must be met:

  • Use 100% of your PPP funds within your Loan Forgiveness Covered Period
  • Use 60% or more of PPP funds on eligible payroll costs
  • Use up to 40% of PPP funds on other eligible non-payroll costs

If you use less than 60% of your PPP funds on eligible payroll costs, you will only be eligible for partial loan forgiveness. Please note that your total forgiveness amount depends on other criteria as well. For example, salary, wage or headcount reductions may reduce the forgivable amount for some borrowers.

For loan support to meet other needs, check out the Economic Injury Disaster Loan and advance offered by the SBA.

Loan forgiveness

Are loans through the Paycheck Protection Program forgivable?

In general, loans may be forgivable, in whole or in part, if the funds are used as directed by the SBA, including but not limited to the following criteria:

  • At least 60% of the forgiveness amount must be attributable to eligible payroll costs
  • No more than 40% of the forgiveness amount may be attributable to eligible non-payroll costs
  • Cash compensation for which forgiveness is sought may not exceed $100,000 annualized per employee.
  • Owner compensation forgiveness is subject to limits that vary depending on the type of owner. These are laid out in SBA guidance.
  • To be eligible for forgiveness, eligible costs must be paid during your covered period, or incurred during your covered period and paid by the next regular payroll date, billing date, or health insurance premium due date, as applicable. The covered period is a period running from 8 to 24 weeks from the time you receive your loan proceeds.
  • Your forgiveness amount may be reduced based upon reductions in full-time equivalent (FTE) employees or reductions in employee salaries or wages since the first quarter of 2020. Such forgiveness reductions may be avoided if borrowers rehire FTEs or restore employee salary or wage reductions on or before December 31, 2020, or conduct such rehiring and restoration of wages no later than the last day of the loan’s covered period for loans made on or after December 27, 2020, as described in SBA guidance

 

Lenders are responsible for approving and denying loan forgiveness. To apply for loan forgiveness, you can submit a request to your lender.

What is the loan forgiveness covered period?

Your loan forgiveness covered period begins on the date you receive your loan proceeds, and ends on a date chosen by the borrower between 8 and 24 weeks later. You don’t have to use all your loan proceeds during the loan forgiveness covered period, but only eligible costs paid during that period, other than certain costs incurred during the covered period and paid before the first regular payroll date, billing date, or health insurance premium due date (as applicable) after the covered period, are eligible for forgiveness. Costs incurred after the loan forgiveness covered period won’t be forgiven.

How do I apply for loan forgiveness?

If you’re a PPP loan recipient, you will submit a PPP loan forgiveness application to your lender or the lender servicing your PPP loan. Once you submit your complete application for forgiveness, the lender will have 60 days to accept or deny your application.

Depending on the type of application you submit, you may be required to include with your application documents verifying costs such as your payroll and non-payroll expenses and full time employees. In general, the simplified application (Form 3508S) for borrowers with loans of $150,000 or less requires borrowers to submit no supporting documents or very few supporting documents, although borrowers are required to retain certain supporting documents for 3-4 years.

For more information about PPP loan forgiveness documentation, please refer to the SBA’s PPP loan forgiveness application instructions and the SBA’s website.

When is the deadline to apply for forgiveness for my first loan?

The deadline to apply for forgiveness is the maturity date of your loan. If your loan was made before June 5, 2020, you have a two-year term (unless you and your lender agreed to extend the term to five years). If your loan was made on or after June 5, 2020, you have a five-year term.

Note that although your forgiveness application does not need to be filed until the maturity date of your loan, you will be required to start making loan payments at the end of your Deferment Period. If you do not file a loan forgiveness application, your Deferment Period ends approximately ten months after the conclusion of the maximum 24-week covered period, which begins on the date you receive your loan proceeds.

How should I spend my loan if I want it to be forgiven in full?

You maybe be eligible for forgiveness in full if:

  • You pay eligible payroll or non payroll costs during the Covered Period, or you incur such costs during the last pay period of the Covered Period and pay them on or before the next regular payroll date or billing date
  • You spend at least 60% of your forgiveness amount sought on eligible payroll expenses (no more than 40% on eligible non payroll expenses)
  • For any given employee, the amount of forgiveness you seek is within the limit of $100,000 annualized per employee; and
  • The amount of forgiveness you seek based on owner compensation complies with the SBA’s owner compensation caps, which vary by type of owner and which can be found in SBA guidance

 

Eligible payroll costs include compensation to employees whose principal place of residence is the United States, in the form of:

    • Salary, wages, commissions, or similar compensation
    • Cash tips or the equivalent
    • Payment for vacation, parental, family, medical, or sick leave
    • Allowance for separation or dismissal
    • Payment for the provision of employee benefits consisting of group health care or group life, disability, vision, or dental insurance, including insurance premiums, and retirement
    • Payment of state and local taxes assessed on compensation of employees; and
    • For an independent contractor or sole proprietor, wages, commissions, income, or net earnings from self-employment, or similar compensation, subject to SBA rules

 

Eligible non payroll costs include:

      • Interest payments on any business mortgage obligation on real or personal property that was incurred before February 15, 2020 (but not any prepayment or payment of principal)
      • Payments on business rent obligations on real or personal property under a lease agreement in force before February 15, 2020
      • Business utility payments for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020
      • Covered operations expenditures, covered property damage costs, covered supplier costs, and covered worker protection expenditures, as defined in SBA rules

 

Please note that your total forgiveness amount depends on other criteria as well. For example, salary, wage or headcount reductions during the loan forgiveness covered period may reduce the forgivable amount for some borrowers.

Do I qualify for loan forgiveness under the Paycheck Protection Program if I laid off workers?

In general, your loan forgiveness amount may be reduced if you reduced headcount. Reductions in headcount are measured from a reference period, which can be either:

      • February 15, 2019 through June 30, 2019
      • January 1, 2020 through February 29, 2020; or
      • In the case of a seasonal employer, a consecutive 12-week period between February 15, 2019 and February 15, 2020.

 

If the average weekly number of Full Time Equivalent Employees (“FTEEs”) you employ during your Loan Forgiveness Covered Period is less than the average weekly number of FTEEs during the reference period, your forgiveness amount may be reduced proportionally by the percentage reduction in FTEEs.

However, a “safe harbor” exists for headcount reductions in certain cases. Your loan forgiveness amount will not be reduced based on headcount reductions if you are able to document in good faith that:

  • You are unable to rehire individuals who were your employees on February 15, 2020,; and are unable to hire similarly qualified individuals for unfilled positions on or before December 31, 2020, (or not later than the last day of the loan’s covered period for loans made on or after December 27, 2020); or
  • You are unable to operate at the same level as before February 15, 2020, due to compliance with certain federal requirements or guidance issued between March 1, 2020, and December 31, 2020 (or not later than the last day of the loan’s covered period for loans made on or after December 27, 2020), related to maintaining standards of sanitation, social distancing, or other work or customer safety requirements related to COVID-19.

Do loans under the Paycheck Protection Program cover paid sick leave?

If you qualify for the Paycheck Protection Program, you can use your loan to pay employer-provided parental, family, medical, and sick leave and other forms of paid time off. Paycheck Protection Program loans don’t cover emergency paid sick and family leave provided by the Families First Coronavirus Response Act (FFCRA).

What interest rates will be charged?

The interest rate of 1% for PPP loans.

If not all of my loan is forgiven, how do I pay it back?

You do not need to make payments until you file for forgiveness, and the SBA pays your forgiveness amount to your lender or notifies your lender that you are not eligible for forgiveness (“Deferment Period”). If you do not apply for forgiveness within 10 months from the end of the maximum 24-week forgiveness covered period your Deferment Period will end on the date that is 10 months after the last day of the maximum 24-week forgiveness covered period.

After you apply for forgiveness, the SBA will notify your lender if your application has been denied in whole or in part, and will remit your full or partial forgiveness amount to your lender; your lender would then notify you when your first payment is due. If the Deferment Period ends with an unforgiven balance on your loan, you must begin to make loan payments at that time. PPP loans have a 1% interest rate, and interest will continue to accrue during the Deferment Period.

What if I don’t apply for forgiveness?

If you do not apply for forgiveness within 10 months from the end of the maximum 24-week forgiveness covered period, your Deferment Period will end on the date that is 10 months after the last day of the maximum 24-week forgiveness covered period. If the Deferment Period ends with an unforgiven balance on your loan, you must begin to make loan payments at that time. PPP loans have a 1% interest rate, and interest will continue to accrue during the Deferment Period.