Paycheck Protection Program (PPP) FAQs for Small Businesses Impacted by COVID-19

Where can I apply for the Paycheck Protection Program?

You can start applying for the PPP Program at any lending institution, whichever is approved for the program participation through the existing U.S. Small Business Administration (SBA) 7(a) lending program and additional lenders approved by the Treasury Department.

This could be the nearby bank or a bank you already use. Including numerous community banks, there are thousands of banks that participate in the SBA’s lending programs already.

In order to apply for the program, you don’t have to visit any government institution. Simply, you can dial a call to your bank or just find SBA-approved lenders in your area/region through the SBA’s Lender Match online tool.

You can call your Women’s Business Center or local Small Business Development Center and they’ll provide you free assistance as well as guide you to lenders.

Who is eligible for the PPP loan? How do I know?

You’re eligible for the loan if your small business employs 500 employees or fewer, or if your business is in an industry that has an employee-based size standard through SBA that is higher than 500 employees.

In addition, if you have a hotel, restaurant or a business that falls within the North American Industry Classification System (NAICS) code 72, “Accommodation and Food Services,” and each of your locations has 500 employees or fewer, you are eligible.

Tribal businesses, 501(c)(19) veteran organizations, and 501(c)(3) non-profits, including religious organizations, will also be eligible for the program. Non-profit organizations are subject to SBA’s affiliation standards. Independently owned franchises with under 500 employees, who are approved by SBA, are eligible as well. Eligible franchises can be found through Franchise Directory of SBA.

Am I eligible if I’m a gig economy worker or an independent contractor?

Yes. Independent contractors, sole proprietors, gig economy workers, and self-employed individuals are all eligible for the PPP – Paycheck Protection Program.

What is the maximum amount I can borrow?

Any small business has the eligibility to borrow an amount that is 250% of their average payroll expenses in a month, which is up to a 10 million dollars in total.

This amount intention is to cover 8-week payroll expenses and any possible additional amounts utilized for making payments towards the debt obligations. The 8-weeks period may be applicable to any timeframe between February 15th, 2020 and June 30th, 2020.

The seasonal expenses of a business will be measured utilizing 12 weeks period, beginning February 15th, 2019 or March 1st, 2019, whichever the seasonal employer will chose.

How can I make the best use of money such that my loan will be forgiven?

The principal amount that may be forgiven is equal to the sum of expenses for payroll, and existing interest payments on mortgages, leases, utility service agreements and rent payments.

The payroll costs generally include employee salaries (up to an annual rate of pay of $1-Lakh), paid sick or medical leave, group health insurance premiums, hourly wages and cash tips.

You’re also entitled to use the PPP for other business related expenses, something like inventory, but that loan portion will not be forgiven.

When is the loan forgiven?

At the end of the 8-week period after one takes out the loan, the loan is forgiven. As a borrowers, you will have to work with lenders to verify the covered expenses and the proper forgiveness amount.

What is the covered loan period?

The covered loan period during which the expenses can be forgiven extends from February 15th, 2020 to June 30th, 2020. As a borrower you can choose which 8 weeks you want to count towards the covered period and it can start as early as February 15th, 2020.

How much of my loan will be forgiven?

The Paycheck Protection Program (PPP) purpose is to help small businesses retain their employees, at the current base pay.

If all employees are kept, the entire loan will be forgiven, but if you still lay off employees, the forgiveness will be reduced by the decrease percent in the no. of employees.

If the total payroll expenses on workers makes less than $100,000 annually decreases by more than 25%, the loan forgiveness will be reduced by same amount. If you’ve already laid off some employees, you can still be forgiven for the full amount of your payroll cost if you rehire your employees by June 30th, 2020.

Am I responsible for the interest on forgiven loan amount?

Answer is ‘no’, if the PPP full principal loan is forgiven, the borrower which is you is not responsible for the accrued interest the covered period of 8 weeks. The loan remainder that is not forgiven will be operated accordingly to the terms of loan which you and lender agreed upon.

What is the rate of interest and loan amount terms that are not forgiven?

The loan terms not forgiven may actually differ based on a case-by-case. However, the maximum loan terms feature 10 years term with the interest capped at 4% and a 100% loan guaranteed by the SBA.

You no need to pay any fees on the loan, and the collateral requirements and even the personal guarantees are waived off.

The loan payments will defer for at least 6 months and up to 1 year starting at the loan origination. When is the deadline of application for the Paycheck Protection Program (PPP)? Applicants are eligible to apply for the PPP loan until June 30th, 2020.

I have taken out a bridge loan through my state, am I eligible to apply for the PPP Program?

Yes, you can take out a state bridge loan and are still be eligible for the Paycheck Protection Program PPP loan.

If I have applied for, or received an Economic Injury Disaster Loan (EIDL) related to COVID19 before the Paycheck Protection Program became available, will I be able to refinance into a PPP loan?

Yes. If you received an EIDL loan related to COVID-19 between January 31st, 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.

Credits: www.sba.gov

For more information, please check out the following link.


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