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SBA Releases Additional Guidance for Paycheck Protection Program (PPP)


The SBA has released some much-anticipated guidance, as well as the application form, for the Paycheck Protection Program (PPP). The program authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis.

Note: This article was originally published on 4.1.2020 and was revised on 4.8.2020 from its previous version to reflect changes in legislation, guidance, and SBA instructions.

The following details have been released:

  • All loan terms will be the same for everyone.
  • The loan amounts will be forgiven as long as:
    • The loan proceeds are used to cover payroll and payroll costs, mortgage interest, rent and utility costs, and interest on debt obligations (non-payroll costs need to have been in place before February 15, 2020) over the eight weeks after the loan is made; and
    • Employee headcount and compensation levels are maintained.
  • Payroll costs are capped at $100,000 on an annualized basis for each employee. Due to the likely high subscription, not more than 25% of the forgiven amount may be for non-payroll costs.
  • Loan payments will be deferred for six months.

We have also received additional FAQs on the program:

When can I apply?

  • Starting April 3, 2020, small businesses and sole proprietorships can apply for and receive loans to cover their payroll and other specified expenses through existing SBA lenders.
  • Starting April 10, 2020, independent contractors and self-employed individuals can apply for and receive loans to cover their payroll and other specified expenses through existing SBA lenders.
  • Other regulated lenders will be available to make these loans as soon as they are approved and enrolled in the program.

Where can I apply?

You can apply through any existing SBA lender or any federally insured depository institution, federally insured credit union and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating. Visit for a list of SBA lenders.

Who can apply?

In general, a small business concern, IRC 501(c)(3) tax-exempt nonprofit, IRC 501(c)(19) tax-exempt veterans organization, tribal business concern, sole proprietor, independent contractor, self-employed individual or any other business with 500 or fewer employees whose principal place of residence is in the United States.

Businesses in specific industries can have more than 500 employees if they meet applicable SBA employee-based size standards for those industries (click here for additional detail).

A business with more than 500 employees can also be eligible if they meet the statutory definition of a small business concern or “alternative size standard” of (1) not more than $15 million in tangible net worth and (2) less than $5 million of average after-tax net income.

For this program, the SBA’s affiliation standards are waived for small businesses (1) in the hotel and food services industries (click here for NAICS code 72 to confirm); or (2) that are franchises in the SBA’s Franchise Directory (click here to check); or (3) that receive financial assistance from small business investment companies licensed by the SBA. Additional guidance may be released as appropriate.

Independent contractors should apply for a PPP loan on their own, thus do not count for purposes of a borrower’s loan calculation or for purposes of calculating the number of employees.

Applicants who meet the previous eligibility requirements are still deemed ineligible for a PPP loan if, for example:

  • Engaged in any activity that is illegal under federal, state, or local law
  • 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
  • The applicant, or any business owned or controlled by the applicant or applicant 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

Additionally, 13 Code of Federal Regulations 120.110 establishes additional ineligible businesses. We are recommending all companies to review the entities listed in this document and also confirm eligibility with their lender should they have questions.

What do I need to apply?

You will need to complete the Paycheck Protection Program loan application and submit the application with the required documentation to an approved lender that is available to process your application by June 30, 2020. Click here for the form.

What documents will be needed with my application?

  • 2019 IRS Quarterly 940, 941 or 944
  • The last 12 months of payroll reports, beginning with your most recent payroll date and going backward 12 months. Payroll report must show the following:
    • Gross wages for each employee, including the officer(s) if paid W-2 wages
    • Paid time off for each employee
    • Vacation pay for each employee
    • Family medical leave pay for each employee
    • State and Local taxes assessed on the employee’s compensation for each employee
  • Documentation showing a total of all health insurance premiums paid by the Company under a group health plan. Include all employees and the owners
  • Document the sum of all retirement plan funding that was paid by the Company (do not include funding that came from the employees out of their paycheck deferrals). Include all employees, including company owners 401K plans, Simple IRA, and SEP IRA’s

What other documents will I need to include in my application?

You will need to provide your lender with payroll documentation.

Do I need to first look for other funds before applying to this program?

No. The SBA is waiving the usual requirement that you try to obtain some or all of the loan funds from other sources (i.e., we are waiving the “Credit Elsewhere” requirement).

How long will this program last?

Although the program is open until June 30, 2020, we encourage you to apply as quickly as you can because there is a funding cap, and lenders need time to process your loan.

How many loans can I take out under this program?

Only one.

What can I use these loans for?

You should use the proceeds from these loans on your:

  • Payroll costs, including benefits
  • Interest on mortgage obligations, incurred before February 15, 2020
  • Rent, under lease agreements in force before February 15, 2020
  • Utilities, for which service began before February 15, 2020
  • Interest on other debt obligations incurred before February 15, 2020

What counts as payroll costs?

Payroll costs include:

  • Salary, wages, commissions, or tips
  • 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.

How large can my loan be?

Loans can be for up to two months of your average monthly payroll costs from the last year plus an additional 25% of that amount.

That amount is subject to a $10 million cap. If you are a seasonal or new business, you will use different applicable time periods for your calculation.

Eligible salary, wages and other monetary compensation is capped at $100,000 annually per employee for purposes of calculating the maximum loan amount and loan forgiveness. This does not include non-monetary benefits paid by the company.

How much of my loan will be forgiven?

You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utility payments over the eight weeks after getting the loan. Due to the likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.

You will also owe money if you do not maintain your staff and payroll.

  • Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
  • Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
  • Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.

How can I request loan forgiveness?

You can submit a request to the lender that is servicing the loan. The request will include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on an eligible mortgage, lease and utility obligations.

You must certify that the documents are accurate and that you used the forgiveness amount to keep employees and make qualified mortgage interest, rent, and utility payments.

The lender must decide on forgiveness within 60 days.

What is my interest rate?

1.0% fixed rate.

When do I need to start paying interest on my loan?

All payments are deferred for six months; however, interest will continue to accrue over this period.

When is my loan due?

In 2 years.

Can I pay my loan earlier than two years?

Yes. There are no prepayment penalties or fees.

Do I need to pledge any collateral for these loans?

No. No collateral is required.

Do I need to guarantee this loan personally?

No. There is no personal guarantee requirement. However, if the proceeds are used for fraudulent purposes, the U.S. government will pursue criminal charges against you.

What do I need to certify?

As part of your application, you need to certify in good faith that:

  • The applicant was in operation on February 15, 2020, and had employees for whom it paid salaries and payroll taxes or paid independent contractors.
  • Current economic uncertainty makes this loan request necessary to support the ongoing operations of the applicant.
  • The funds will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments; I understand that if the funds are knowingly utilized for unauthorized purposes, the federal government may hold me legally liable, such as for charges of fraud.
  • Documentation verifying the number of full-time equivalent employees on the payroll as well as the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight weeks following this loan will be provided to the Lender.
  • Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities.
  • During the period beginning on February 15, 2020, and ending on December 31, 2020, the applicant has not and will not receive another loan under this Program.
  • I further certify that the information provided in this application and the information provided in all supporting documents and forms is true and accurate in all material respects. I understand that knowingly making a false statement to obtain a guaranteed loan from SBA is punishable under the law, including under 18 USC 1001 and 3571 by imprisonment of not more than five years and/or a fine of up to $250,000; under 15 USC 645 by imprisonment of not more than two years and/or a fine of not more than $5,000; and, if submitted to a federally insured institution, under 18 USC 1014 by imprisonment of not more than thirty years and/or a fine of not more than $1,000,000.
  • I acknowledge that the Lender will confirm the eligible loan amount using tax documents I have submitted. I affirm that these tax documents are identical to those submitted to the IRS. I also understand, acknowledge, and agree that the Lender can share the tax information with SBA’s authorized representatives, including authorized representatives of the SBA Office of Inspector General, for the purpose of compliance with the SBA Loan Program Requirements and all SBA reviews.

The SBA continues to update their site with additional guidance, which can be accessed here.

We will continue to communicate with our clients as additional details become available through the SBA. Please do not hesitate to reach out to us with any questions.


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