FAQS FOR PAYCHECK PROTECTION PROGRAM
1) Where can I apply for the Paycheck Protection Program?
You can apply for the Paycheck Protection Program (PPP) with any lending institution that is approved to participate in the program through the existing U.S. Small Business Administration (SBA) 7(a) lending program and additional lenders approved by the Department of Treasury. This could be the bank you already use, or a nearby bank. There are thousands of banks that already participate in the SBA’s lending programs, including numerous community banks. You do not have to visit any government institution to apply for the program. You can call your bank or find SBA-approved lenders in your area through SBA’s online Lender Match tool. You can call your local Small Business Development Center or Women’s Business Center and they will provide free assistance and guide you to lenders.
Please use the Paycheck Protection Program Loan Application:
Initial guidance from Treasury can be found here:
SBA’s Find Eligible Lenders Tool: https://www.sba.gov/paycheckprotection/find
Some banks started accepting applications from employers and small proprietorships on April 3, 2020. Sole proprietors and single member LLC owners with no employees can apply starting on April 10, 2020.
2) Who is eligible for the loan?
Business and entities must have been in operation on February 15, 2020.
Small business concerns, as well as any business concern, a 501(c)(3) nonprofit organization, a 501(c)(19) veterans organization, or Tribal business concern described in section 31(b)(2)(C) that has not more than 500 employees, or the applicable size standard in number of employees for the North American Industry Classification System (NAICS) industry as provided by SBA, if higher.
Small business concerns can be eligible borrowers even if they have more than 500 employees, as long as they satisfy the existing statutory and regulatory definition of a “small business concern” under section 3 of the Small Business Act, 15 U.S.C. 632. A business can qualify if it meets the SBA employee-based or revenue-based size standard corresponding to its primary industry. Go to sba.gov/size for the industry size standards.
Additionally, a business—even if it has more than 500 employees–can qualify for the Paycheck Protection Program as a small business concern if it met both tests in SBA’s “alternative size standard” as of March 27, 2020: (1) maximum tangible net worth of the business is not more than $15 million; and (2) the average net income after Federal income taxes (excluding any carry-over losses) of the business for the two full fiscal years before the date of the application is not more than $5 million.
Individuals who operate a sole proprietorship or as an independent contractor and eligible self-employed individuals.
Any business concern that employs not more than 500 employees per physical location of the business concern and that is assigned a NAICS code beginning with 72 (accommodation and food services), 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 the Administration, and company that receives funding through a Small Business Investment Company.
3) I am an independent contractor or gig economy worker, am I eligible?
Yes. Sole proprietors, independent contractors, gig economy workers, and self-employed individuals are all eligible for the Paycheck Protection Program.
4) Who is ineligible for the PPP loan?
You are ineligible for a PPP loan if, for example:
You are engaged in any activity that is illegal under federal, state, or local law;
You are a household employer (individuals who employ household employees such as nannies or housekeepers);
An owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony within the last five years; or
You, or any business owned or controlled by you or any of your owners, has ever obtained a direct or guaranteed loan from SBA or any other Federal agency that is currently delinquent or has defaulted within the last seven years and caused a loss to the government.
The Administrator, in consultation with the Secretary of the Treasury (the Secretary), determined that household employers are ineligible because they are not businesses. 13 CFR 120.100.
Businesses that are not eligible for PPP loans are identified in 13 CFR 120.110 and described further in SBA’s Standard Operating Procedure (SOP) 50 10, Subpart B, Chapter 2, except that nonprofit organizations authorized under the Act are eligible. (SOP 50 10 can be found at https://www.sba.gov/document/sop-50-10-5-lender-development-company-loan-programs.)
5) Are Real Estate holding entities eligible to apply for the PPP?
Real estate holding entities are ineligible to apply for the PPP based on the SBA SOP-50-10. There are no rules that would prevent an affiliated management company, who has employees and payroll, to apply.
(NOTE: individual real estate holding companies may be eligible to APPLY FOR Economic Injury Disaster Loans (“EIDL”) and up to $10,000 Emergency Economic Injury Grants (“EEI GRANTS”) – see EIDL and EEI Grants Q&As.)
6) What is the maximum amount I can borrow?
The amount any small business is eligible to borrow is 250 percent (2.5 times) of their average monthly payroll costs, plus the outstanding amount of an existing SBA disaster loan made during 1/1/20 – 4/3/20, up to a total of $10 million. Pursuant to Treasury’s definition, payroll costs include employee gross salaries, hourly wages and cash tips, paid sick or medical leave (up to an annual aggregate amount of $100,000 per employee) plus pension costs, group health insurance premiums, and state and local taxes imposed on compensation.
7) What costs are not eligible in the definition of “payroll costs”?
Compensation of employees whose principal place of residence is outside of the U.S.
Qualified sick and family leave for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act
8) Do independent contractors count as employees for purposes of PPP loan calculations?
No, independent contractors have the ability to apply for a PPP loan on their own so they do not count for purposes of a borrower’s PPP loan calculation.
9) How can I use the money such that the loan will be forgiven?
The amount of principal that may be forgiven is equal to the sum of expenses–paid during the 8-week period starting from the date the loan was funded-for payroll costs, and existing interest payments on mortgages, rent payments, leases, and utility service agreements. Non-payroll expenses eligible for forgiveness have to be under contracts, mortgages, and leases in effect as of February 15, 2020. Payroll costs include employee gross salaries, hourly wages and cash tips, paid sick or medical leave (up to an annual aggregate amount of $100,000 per employee) plus pension costs, group health insurance premiums, and state and local taxes imposed on compensation.
10) When is the loan forgiven?
The loan is forgiven at the end of the 8-week period after from loan funding. Borrowers will work with lenders to verify covered expenses and the proper amount of forgiveness. It is anticipated that the SBA will be issuing their version of a “Loan Forgiveness Application” that will be submitted to the lending institution.
11) How much of my loan will be forgiven?
The purpose of the Paycheck Protection Program is to help you retain your employees, at their current base pay. If you keep all your employees, the entirety of the loan may be forgiven. If you still lay off employees, the forgiveness will be reduced by the percent decrease in the number of employees. If your total payroll expenses on workers making less than $100,000 annually decreases by more than 25 percent, loan forgiveness will be reduced by the same amount. (NOTE: We expect the SBA to issue additional guidance related to the forgiveness process and the amounts eligible for forgiveness. We will issue another FAQ when that information is available.)
12) Am I responsible for the interest on the forgiven loan amount?
No, if the full principal of the PPP loan is forgiven, the borrower is not responsible for the interest accrued in the 8-week covered period. The remainder of the loan that is not forgiven will operate according to the loan terms agreed upon by you and the lender.
13) What are the interest rate and terms for the PPP loan amount that is not forgiven?
The terms of the loan not forgiven may differ on a case-by-case basis. However, the PPP Loan carries a term of 2 years and 1.0% interest rate. You will not have to pay any fees on the loan, and collateral requirements and personal guarantees are waived. Loan payments will be deferred for the first six months from loan origination; however, interest will accrue during those first six months.
14) When is the application deadline for the Paycheck Protection Program?
Applicants are eligible to apply for the PPP loan until June 30th, 2020.
15) I took out a bridge loan through my state, am I eligible to apply for the Paycheck Protection Program?
Yes, you can take out a state bridge loan and still be eligible for the PPP loan.
16) If I have applied for or received an Economic Injury Disaster Loan (EIDL) related to COVID- 19 before the Paycheck
Protection Program became available on April 3, 2020, will I be able to refinance into a PPP loan?
Yes. If you received an EIDL loan related to COVID-19 between January 31, 2020 and the date at which the PPP becomes available, you would be able to refinance the EIDL into the PPP for loan forgiveness purposes. However, you may not take out an EIDL and a PPP for the same purposes. Remaining portions of the EIDL, for purposes other than those laid out in loan forgiveness terms for a PPP loan, would remain a loan. If you took advantage of an emergency EIDL grant award of up to $10,000, that amount would be subtracted from the amount forgiven under PPP.
17) What are affiliation rules?
Affiliation rules become important when SBA is deciding whether business affiliations preclude them from being considered “small” – i.e., having less than 500 employees. Generally, affiliation exists when one business controls or has the power to control another or when a third party (or parties) controls or has the power to control both businesses. SBA has granted some exceptions to the affiliation rules, primarily to the hospitality industry, certain franchises, and faith-based organizations.
SBA Affiliation Rules for the PPP can be found here: https://www.sba.gov/sites/default/files/2020-04/Affiliation%20rules%20overview%20%28for%20public%29%20v2.pdf
18) What types of non-profits are eligible?
In general, 501(c)(3) and 501(c)(19) non-profits with 500 employees or fewer. In addition, as per SBA’s latest guidance, faith based organizations, including houses of worship, are also included in the PPP Loan program.
19) Can I get more than one PPP loan?
No, an entity is limited to one PPP loan. Each loan will be registered under a Taxpayer Identification Number at SBA to prevent multiple loans to the same entity.
20) How does the PPP loan coordinate with SBA’s existing loans?
Borrowers may apply for PPP loans and other SBA financial assistance, including Economic Injury Disaster Loans (EIDLs), 7(a) loans, 504 loans, and microloans, and also receive investment capital from Small Business Investment Corporations (SBICs). However, you cannot use your PPP loan for the same purpose as your other SBA loan(s). For example, if you use your PPP loan to cover payroll for the 8-week covered period, you cannot use a different SBA loan product for payroll for those same costs in that period, although you could use it for payroll not during that period or for different workers.
21) What documents do lenders need to submit to get loan forgiveness?
Verification of the number of full-time equivalent employees on payroll, as well as pay rates prior to, and after, the PPP loan period. We would anticipate this would include:
Payroll tax filings reported to the IRS and state payroll tax filings
Cancelled checks verifying mortgage interest, lease, and utility payments
Certification that documentation is true and correct, and that the amount considered for forgiveness was used appropriately under Paycheck Protection Program guidelines.
Other documentation as deemed necessary by the SBA
(NOTE: We expect the SBA to issue additional guidance related to the forgiveness process and the amounts eligible for forgiveness. We will issue another FAQ when that information is available.)
22) For PPP loan, Can I use e-signatures or e-consents if a borrower has multiple owners?
Yes, e-signature or e-consents can be used regardless of the number of owners.
23) Is the PPP “first-come, first-served?”
24) What happens if PPP loan funds are misused?
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. If one of your shareholders, members, or partners uses PPP funds for unauthorized purposes, SBA will have recourse against the shareholder, member, or partner for the unauthorized use.