Paycheck Protection Program for small businesses

It's April 2020, and it feels a little strange to think that such a small organism has managed to heavily impact our lives and the way we conduct business. While things are difficult, initiatives like the Paycheck Protection Program (PPP) by the Small Business Administration (SBA) are here to give some of us a fighting chance and help turn things around. So in this blog, we will attempt to answer some common questions that you might have about the PPP.

What is the PPP?

The PPP is a type of loan that struggling small business owners living and operating in the United States of America can apply for. To give you a bit of background, it's an initiative driven by the SBA that aims to fully utilize the $349 billion allocated to it to reduce layoffs and allow small businesses to continue employing their staff for at least the next two months. The money you borrow under the PPP should be used to pay employee wages, cover monthly rent, pay off mortgage interest, and keep up with utility bills. The program comes into effect on April 3, 2020 and funds will be given out to businesses on a first-come-first-served basis until June 30, 2020.

ANNOUNCEMENT: We are hosting a live session titled Guide to Paycheck Protection Program (PPP) Loan Forgiveness on June 5th, 2020. This is a free session open to everyone.  Click here to register for it.

UPDATE: On April 24, 2020, an additional $310 billion was allocated toward the PPP by the US government to help small businesses under the CARES Act. Out of the $310 billion, $250 billion will go toward replenishing the PPP. The remaining $60 billion will be diverted to community banks and community development financial institutions to cater to their local communities. This basically means that all small businesses with a SBA certification number from round 1 of the PPP will receive their funds in another 10-14 days. Businesses that have applied for funds, but do not possess a SBA certification number yet, have another chance to work with their lenders to push through their applications and receive a loan. Last but not least, small businesses that are eligible for the PPP but did not get a chance to apply for a loan during round 1 can do so starting April 27, 2020.

Who can borrow under the PPP?

You can apply and qualify for this loan if you are running a business in the US or within its territories and your business was operational as of February 15, 2020 (as reported via Form 1099-MISC). You are also required to meet SBA's size requirements for annual receipts in your industry and belong to one of the following categories:

  • Small businesses with fewer than 500 employees regardless of revenue

  • Veterans' organizations under Section 501(c)(19) of the IRC (Internal Revenue Code)

  • Nonprofit entities under Section 501(c)(3) of the IRC of 1986 (as amended) with less than 500 employees

  • Independent contractors, sole proprietors, and self-employed individuals who regularly carry on any trade or business, including those in the "gig economy"

  • Hospitality or food-service businesses (whose NAICS codes begin with 72) with fewer than 500 employees per physical location

  • Tribal business entities under section 31(b)(2)(C) of the Small Business Act that meet SBA's size requirements

Note: Businesses in certain industries can have more than 500 employees and still be eligible for the PPP as long as they meet SBA's size standards. If you're a household employer then you will not be eligible for a loan under the PPP. Also, if you have some legal problems, then your application could be rejected based on the qualifying terms laid out by the SBA.

Where can I apply for the PPP?

According to the SBA, you can apply for this loan through any SBA-approved institutions, including federally insured banks, credit unions, and existing lenders that may be allowed by the SBA to distribute these loans. Just reach out to your current bank or lender and check with them to see if they are an authorized institution. Look up lenders here.

How much can I borrow through this program?

You can borrow up to 2.5 times your average monthly payroll costs. The amount cannot exceed $10 million. Since the whole program has a fixed budget and is given out on a first-come-first-served basis, it is better if you apply for it as soon as you can.

What are some merits of the PPP?

On top of fee waivers, the biggest merit of this program is the fact that the money borrowed under this program can be completely forgiven as long as you fulfill certain conditions:

  • You must utilize more than 75% of the borrowed sum to rehire laid-off employees, pay your staff, and maintain a steady head count.

  • When your loan amount is transferred to you, you are required to spend it on the specified eligible expenses (employee wages, monthly rent, mortgage interest, and utility bills) within the first eight weeks.

  • You must keep all expense receipts and later complete a different application, which you can get from your bank or lender, in order to qualify for forgiveness.

Also, loans under the PPP do not require a collateral or a guarantee from its applicants.

In the event that you aren't eligible to have your loan pardoned, you'll need to pay it back with 1% interest within the next 2 years. That said, you don't have to pay anything during the first six months from the date of disbursement of the loan.

How do I get started?

  • You can start by making sure that you are eligible to apply for the PPP based on the qualifying requirements set by the SBA.
  • Inform all your employees of the new Family First Coronavirus Response Act (FFCRA) regulations without fail before applying for this program. This is a necessary prerequisite to qualify for the PPP.
  • Using the list of lenders on the SBA website, find a suitable lender near you. Speak to them and see what they need. You can either get the application form from them or use the one we've linked below.
  • Get your payroll documentation ready and fill out the application form (also known as the SBA Form 2483). Alternatively, you can hire an agent to do it for you.
  • Submit the completed form and documents to your lender to initiate the process.

UPDATE: As an applicant, you're now required to declare and certify to your lender "under good faith" that you do not have access to additional capital, and that the current economic uncertainty has made this loan an absolute necessity for you to continue your operations.

We have made a PPP application form based on the sample provided by the SBA using Zoho Writer to help you apply for this loan asap. To make use of this, click on the link to open the form. Fill in your details by selecting different fields and columns. Once you're done, download it into your computer. Next, you'll need to log in or sign up for Zoho Sign, and upload the completed form into it in order to sign the form digitally. You can then share the completed form with your collaborators (i.e., accountants, legal team, or an agent), and have it verified before you send it to your SBA approved bank or lender to get the process started.

Important Note: Please talk to your bank or lender to see if they provide the application form by themselves or accept digitally signed PPP application forms before making use of the one we have shared above.

Are there other programs that small business can apply for?

There are several other relief programs provided for small businesses in the US, like the Economic Injury Disaster Loan (EIDL) and the SBA's Small Business Debt Relief Program. However, you'll need to check the SBA website or check with your bank or lender to see if you qualify for one of these.

Disclaimer: We don't claim to be experts on this subject. We have drafted this blog based on the information we gathered from the official SBA website. Our goal is to pass along this information to as many US-based small businesses as possible, so that they can make the best use of this resource and stay strong during these tough times. We will keep this blog updated from time to time to reflect the changes made to the PPP regulations by the SBA. So, there's a chance you might see something different or new when you revisit the blog.


7 Replies to Paycheck Protection Program for small businesses

  1. Good Afternoon Gentlemen. You may want to remove this now that the program has run out of funds. Congress is looking at another $250 Billion cash infusion but I wouldn't hold your breath. Both the House and the Senate are now at each other's throats with 'pork' agendas'. Welcome back to normal.

  2. I am a "essential" business owner who operates it alone, with no pay roll. I pay a mortgage and utilities as do others. Do I qualify for the PPP ?

    1. Hi Kevin, hope you are safe and well. Please check out a section titled "How do I get started?" in the same blog to know more. Alternatively, you can try the SBA's official website to find the nearest SBA approved lender and speak to them. Hope this helps!

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