What Is the Paycheck Protection Program?
Offered as an SBA loan program, the Paycheck Protection Program (PPP) provides federally-guaranteed loans to eligible small businesses. Loans are the lesser of $10 million ($2 million for second draw loans) and a calculated amount based on payroll and may be forgivable. These loans are intended to help small businesses retain employees throughout and after the Coronavirus (COVID-19) crisis.
There have been additional funds approved for PPP loans. However, funding is still limited, so it is important to submit your application as soon as possible. It is not guaranteed that funding will be available for all qualified loan applicants. The PPP program will be open through March 31, 2021, while funds are available.
- First draw- no previous PPP loans
- Second draw – has or had a PPP loan during the previous round
- Interest Rate of 1.00% APR*
- 5-year Term
- Defer payments for 10 months
- Loan forgiveness on qualified loans
Is Your Small Business Eligible for the Program?
The CARES Act has expanded the eligibility criteria for borrowers to qualify for a Paycheck Protection Program loan.
- First Draw Loans – Small businesses with 500 or fewer employees whose principal place of residence is in the United States–including nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors–are eligible. Businesses with more than 500 employees are eligible in certain industries.
- Second Draw Loans – Small businesses with 300 or fewer employees whose principal place of residence is in the United States–including nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors–are eligible. Businesses with more than 500 employees are eligible in certain industries.
How Can You Use Your Paycheck Protection Program Loan?
The loan may only be used for:
- Payroll costs and employee commissions or similar compensations
- Insurance premiums and group healthcare benefits during paid sick, family, or medical leave
- Mortgage interest payments (but not prepayment or payment of mortgage principal)
- Commercial space rent and utilities
- Interest on any other debt obligations incurred before January 31, 2020, and April 3, 2020
- Refinancing SBA EIDL loan made between January 1, 2020, and April 3, 2020. FIRST DRAW LOANS ONLY
- Covered operations expenditures
- Covered property damage costs
- Covered supplier costs
- Covered worker protection expenditures
What You Need to Apply:
The date you started your business
- You need to have been in business on or before February 15, 2020, and remain in business at this time. PERMANENTLY CLOSED BUSINESSES ARE NOT ELIGIBLE
Documentation verifying your average monthly payroll costs
- 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; an 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.
- 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.
- Additional documentation required for second draw loans only – proof of 25% reduction in revenue for 2020 when compared to 2019.
David Broadaway, VP Business Lending