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Updated Guide to PPP Loans – The What, Who and How for Small Businesses

February 5, 2021

View all the important details you need to know about the Paycheck Protection Program Loans. Get to know what it’s all about, the eligibility to apply, forgiveness terms, loan uses, and how and when to apply.

1st Draw of PPP Loan

The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on payroll.

Who can apply – Eligibility

1.) 500 or fewer employees (together with affiliates – if applicable)

  • Self-Employed Individuals
  • Sole Proprietorships
  • Independent Contractors
  • Nonprofits
  • Veteran Organizations
  • Tribal Concerns

2.) 500 or more employees – SBA’s Alternative Size Standard (as of March 27, 2020)

Should meet both these requirements:

  1. Maximum tangible net worth of the business is not more than $15 million; and 
  2. The average net income after Federal income taxes (excluding any carry-over losses) of the business for the two full fiscal years before the date of the application is not more than $5 million.

3.) Others

  • Businesses with NAICS Code that begins with 72 (Accommodation & Food Services Sector)
  • Eligible news organizations with no more than 500 employees per physical location
  • Housing cooperatives
  • 501(c)(6) organizations
  • Destination marketing organizations with no more than 300 employee
Full Forgiveness Terms

First Draw PPP Loans qualify for forgiveness if, during the 8- to 24-week period following loan disbursement:

  • Employee and compensation levels are maintained;
  • The loan proceeds are spent on payroll costs and other eligible expenses; and
  • At least 60 percent of the proceeds are spent on payroll costs.
Loan Uses
  • payroll costs, including benefits
  • mortgage interest 
  • rent 
  • utilities 
  • worker protection costs related to COVID-19 
  • uninsured property damage costs caused by looting or vandalism during 2020
  • supplier costs for operations
  • supplier expenses for operations
How to Apply

Borrowers can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, eligible non-bank lender, or Farm Credit System institution that is participating in PPP. 

You can checkout SBA’s lender match function to find a lender near you:
https://catran.sba.gov/lendermatch/form/contact.cfm

Sources

 

2nd Draw of PPP Loan

If you’ve received a PPP Loan in 2020 and will be applying again, you can apply for a PPP Second Draw Loan

Who can apply – Eligibility Requirements
  • Previously received a First Draw PPP Loan and will/has used the full amount only for authorized purposes
  • Can demonstrate at least a 25% reduction in gross revenue between the same quarters in 2020 and 2019 OR at least a 25% reduction in gross revenue in 2020 from 2019
  • Has no more than 300 employees
Full Forgiveness Terms

Second Draw PPP Loans qualify for forgiveness if, during the 8- to 24-week period following loan disbursement:

  • Employee and compensation levels are maintained in the same manner as required for the First Draw PPP loan
  • The loan proceeds are spent on payroll costs and other eligible expenses
  • At least 60 percent of the proceeds are spent on payroll costs
Loan Uses
  • payroll costs, including benefits
  • mortgage interest
  • rent
  • utilities
  • worker protection costs related to COVID-19
  • uninsured property damage costs caused by looting or vandalism during 2020
  • supplier costs for operations
  • supplier expenses for operations

Sources