The Paycheck Protection Program (PPP)

The Paycheck Protection Program, part of the CARES stimulus package, is a federal loan program aimed at helping small businesses who have been impacted by COVID-19.  Businesses with less than 500 employees (subject to limited exceptions), including 501(c)(3) non-profit organizations and 501(c)(19) veterans organizations, are eligible for the Paycheck Protection Program. 

How Does It Work?*

• PPP loan uses can include - payroll costs, healthcare benefits, ultilities,  rent/lease payments, interest on existing business mortgage debt (incurred prior to February 15th, 2020)**
• Loan Amount - Up to 2.5 X business's average monthly payroll.***
• Rate - Fixed 1% Annual Percentage Rate (APR)
• Terms - No payments for the first 6 months, and a total 2-year term
• Forgiveness - Up to 100%

*Program, including rates and terms, subject to change.  Other conditions may apply.  If you received an EIDL loan related to COVID-19 between January 31, 2020 and the date at which the PPP becomes available, you may 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.  **If you have already laid off some employees, you may still be forgiven for the full amount of your payroll cost if you rehire your employees by June 30, 2020.  ***Maximum loan size is up to 2.5 times average monthly eligible payroll costs over the prior 12 months for most businesses, or over a more targeted period for seasonal businesses, but may not exceed $10 million. These loans do not require a personal guarantee or collateral.

Loan Forgiveness

Borrowers may not be responsible for repayment of the loan if the funds are used for forgivable costs.  In addition to using your loan funds on eligible costs, the guidance below may be helpful in maximizing your potential loan forgiveness (subject to change):

• Forgivable Costs - SBA guidance provides four broad categories of costs that are eligible for forgiveness: (1) payroll costs; (2) business mortgage interest payments; (3) business rent or lease payments; and (4) business utility payments.  Subject to some exceptions, forgiveness is generally available for costs incurred with respect to those items during the borrowers “Covered Period” (generally the 8-week period that begins on the date when you received your loan funds) 
• Non-Payroll Costs (e.g., mortgage interest, rent or utility payments) in excess of 25% of the loan amount will impact the amount of forgiveness. 
• Generally, and subject to some exceptions, loan forgiveness will be impacted in cases where there is a reduction in the average number of full time equivalent employees during the covered 8 week period.
• The amount of loan forgiveness may be limited if the salary or hourly wages of certain employees were reduced by 25% or more during the covered period as compared to a previous comparison period.

It is important that borrowers keep track of eligible expenses within the 8-week period, as this will help with the forgiveness application process.  

PPP Loan Forgiveness Resources

Please check the sites below frequently for current and authoritative information regarding PPP loan forgiveness, as the PPP guidance is updated almost daily on these sites.

• U.S. Department of the Treasury
• U.S. Small Business Administration

Beginning the Loan Forgiveness Process

Your banker will be contacting you six weeks after your PPP loan was funded to discuss loan forgiveness and next steps.  The application will be completed online.  However, you may find it helpful to review the  SBA's PPP Loan Forgiveness Application and begin familiarizing yourself with its contents.