SBA Paycheck Protection Loan Program
This page will be updated continuously to reflect the most recent information on the coronavirus. This page was last updated on June 30, 2020.
IMPORTANT UPDATE: This program has been extended to August 8, 2020, and funds remain available.
Already have a PPP loan? On June 4, 2020, the Paycheck Protection Program Flexibility Act was signed into law, providing small businesses with more time and more flexibility to use their Paycheck Protection Program (PPP) loans. The new law:
- Increases the amount that can be used on rent, utilities, and other overhead costs from 25 percent to 40 percent; and it lowers the amount that must be used on payroll costs from 75 percent to 60 percent;
- Extends the period of time that small businesses can use their loan from 8 weeks to 24 weeks and extends the entire program to December 31, 2020;
- Allows small businesses to receive loan forgiveness even if they had trouble rehiring employees or if they have not been able to return to a full operating status;
- Allows small businesses to repay any amount that is not forgiven over five years, instead of just two years; and
- Allows small businesses with PPP loans to defer their payroll taxes as provided in the CARES Act.
Overview of PPP
The information below reflects changes made by the Paycheck Protection Program Flexibility Act.The Coronavirus Aid, Relief, and Economic Security (CARES) Act created a new Small Business Administration (SBA) loan program, called the “Paycheck Protection Program” (PPP). The Paycheck Protection Program provides small businesses with zero-fee loans of up to $10 million to cover 10 weeks of payroll and other operating expenses.
Small businesses have 24 weeks or until December 31, 2020, whichever is earlier, to spend their PPP funds. They can seek forgiveness for PPP funds spent during those 24 weeks on eligible payroll and overhead costs, such as rent, mortgage interest payments, and utility costs.
Small businesses must spend at least 60 percent of the funds on payroll costs and no more than 40 percent on overhead costs. For any amount that is not forgiven, small businesses must repay the loan at 1 percent interest over five years. Payments on any outstanding loan amounts are deferred until the lender receives the amount of the loan that was forgiven or for 10 months for small businesses that did not seek loan forgiveness. PPP loans were available through June 30, 2020.
You are eligible if:
- Your business or entity was in operation on February 15, 2020;
- You are a small business, a 501(c)(3) nonprofit organization, a 501(c)(19) veterans organization, or tribal business concern that has fewer 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.
- You are a sole proprietorship, an independent contractor, or self-employed.
- You are a business that employs not more than 500 employees per physical location and your business has an NAICS code beginning with 72 (accommodations and restaurants), for which the affiliation rules are waived.
- Affiliation rules are also waived for any business operating as a franchise that is assigned a franchise identifier code by the SBA, and any company that receives funding through a Small Business Investment Company.
- Your maximum loan size is 250% of average monthly payroll costs for the one-year period before the loan is made. If you are a seasonal worker, it is 250% of average monthly payroll costs from February 15, 2019, to June 30, 2019, or you can opt to choose March 1, 2019, as the time period start date.
- If you were not in business this time last year, your maximum loan is equal to 250% of your average monthly payroll costs between January 1, 2020, and February 29, 2020.
- The loan maximum in all cases is $10 million.
Payroll costs for the purposes of determining your loan size include:
- Compensation (salary, wage, commission, or similar compensation, payment of cash tip)
- Payment for vacation, parental, family, medical, or sick leave
- Allowance for dismissal or separation
- Payment required for group health care benefits, including insurance premiums
- Payment of any retirement benefit
- Payment of State or local tax assessed on the compensation of employees
The following costs do not count towards your loan size: compensation over $100,000, certain withheld taxes, compensation for employees outside of the United States, and required leave under the Families First Coronavirus Response Act, for which a credit is allowed.
Use of Loan Funds:
You may use the funds for:
- Payroll costs (all costs included above)
- Costs related to group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums
- Employee salaries, commissions, or similar compensations (except as excluded above).
You may also use up to 40 percent of the funds for:
- Payments of interest on any mortgage (but not payment or prepayment of principal)
- Interest on any other debt obligations that were incurred before the February 15, 2020.
For any amounts not forgiven, the loan term is two years for loans approved by the SBA before June 5, 2020, and five years for loans approved by the SBA on or after June 5, 2020. The interest rate is set at 1 percent, and borrowers may not be charged loan fees or prepayment fees. The remaining loan balance continues to be guaranteed by the SBA.
To qualify for forgiveness, you must use at least 60 percent of the loan amount on payroll costs; you may use the remaining 40 percent on eligible overhead costs. If you are unable to spend 60 percent of the loan amount on payroll costs, you will still be eligible for some loan forgiveness. You can apply to your lender to forgive your loan for the amount of payroll costs plus payments of mortgage interest, rent, and utilities incurred during the 24-week period after the loan is originated. The amount that can be forgiven is proportionate to maintaining employees and wages. You must apply through your lender for forgiveness and provide:
- Documentation verifying the number of employees on payroll, their pay rate, IRS payroll and state income tax filings, and unemployment insurance filings;
- Documentation verifying payments of rent, mortgage interest, utilities, and other debt; and
- Certification from your business that the documentation provided is true and that amount of the loan that is being forgiven was used in line with the program’s requirements.
There is a safe harbor for small businesses that reduced the number of employees on their payroll or reduced salaries or wages after February 15, 2020, as long as they restore the number of employees and salaries/wages on or before December 31, 2020.
Small businesses that are unable to maintain the same number of employees on payroll or the same wages as before the public health crisis may still be eligible for full forgiveness if the small business is able to document:
- An inability to rehire employees that were on the payroll before February 15, 2020;
- An inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020; or
- An inability to return to the same level of business activity that the business was operating at before February 15, 2020, due to compliance with requirements or guidance issued by the Secretary of Health and Human Services, the Centers for Disease Control and Prevention, or the occupational Safety and Health Administration between March 1and December 31, 2020, related to sanitation, social distancing, or any other worker or customer safety requirement related to COVID-19.
Any loan amounts not forgiven are carried forward as an ongoing loan for five years at an interest rate of 1 percent.
Payroll tax deferral
The CARES Act allows employers to delay paying the employer-portion of payroll taxes through the end of 2020. The deferred amount is due in two installments—50 percent is due before December 31, 2021, and the other 50 percent is due before December 31, 2022. Because of the Paycheck Protection Program Flexibility Act, deferral is now available for small businesses that receive a PPP loan.
Can I use a Paycheck Protection Loan with other SBA loans?
Yes, you may apply for a paycheck protection loan and other SBA loans, including the SBA economic injury disaster loans, 7(a) loans, 503 loans, and microloans. However, you may not use funds from each of these programs for the same purposes.
For more information about SBA loan programs, please visit the Small Business Administration. More information about the Paycheck Protection Loan Program and other resources for small businesses can be found on the U.S. Senate Committee on Small Business and Entrepreneurship website.