What You Need to Know About the Paycheck Protection Program (PPP)

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Revised 7/21/2020

What is the Paycheck Protection Program (PPP)?
Paycheck Protection Program The PPP provides small businesses with funds to pay up to 8 weeks of payroll costs including benefits. Funds can also be used to pay interest on mortgages, rent, and utilities.

How can I use the money?
The PPP provides small businesses with forgivable loans of up to $10 million per company (8 weeks of payroll) for:
  • Payroll costs including benefits
    • Salary, wages, commissions, or tips (capped at $100,000 per employee)
    • Employee benefits including costs for vacation, parental, family, medical, or sick leave; 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 with no other employees: Schedule C, Line 31 will reflect owner’s salary (capped at $100,000)
  • Interest on a mortgage (not prepayment of or payment on principal) or on rent
  • Utility payments
Who is eligible?
To be eligible, you must be in operation as of February 15, 2020 and one of the following:
  • A small business, as defined by the SBA, with 500 or fewer employees
  • Sole proprietors, the self-employed, and independent contractors 
  • Certain nonprofits also qualify

How soon do you have to use funds?
You must use the funds in the 24 weeks after the loan is issued or through December 31, 2020, whichever comes first. 

How much of the loan is forgiven?
Forgiveness will be based on:

  • Payroll: At least 60% needs to be spent on payroll in order for the loan to be forgiven
  • Number of Staff: Businesses must restore staff or salary levels that were previously reduced by  December 31, 2020. Companies that document their inability to rehire workers and their inability to find similarly qualified workers maintain forgiveness amounts. Companies would be covered separately if they show that they couldn’t resume business levels from before Feb. 15 because they were following federal requirements for sanitization or social distancing.
  • Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee.
What are the loan terms?

The interest rate is 1% fixed rate. All payments are deferred for at least 10 months, though interest will accrue during this period. The loan is to be repaid in a minimum of 5 years, with no prepayment penalties. You will not need to pledge any collateral to receive this loan. 

How to Apply
The Paycheck Protection Program is available through participating lendersApplication form is here. Please note, while the program is open until August 8, 2020, there is a funding cap.

Calculating Payroll:

Calculate your maximum borrow level. Remember to include yourself in the payroll and employee count! Once the loan is distributed, you cannot revise the calculation. 

For Businesses with Employees

  • Step 1: Aggregate payroll costs from the last twelve months for employees whose principal place of residence is the United States. Don’t forget to include your own pay if you take an owner’s draw.
  • Step 2: Subtract any compensation paid to an employee in excess of an annual salary of $100,000 
  • Step 3: Calculate average monthly payroll costs (divide the amount from Step 2 by 12).
  • Step 4: Multiply the average monthly payroll costs from Step 3 by 2.5.
  • Step 5: Add the outstanding amount of an Economic Injury Disaster Loan (EIDL) made less the amount of any “advance” under an EIDL COVID-19 loan (because it does not have to be repaid).

For Businesses with No Employees:

  • Step 1: Find your 2019 IRS Form 1040 Schedule C Line 31 net profit amount (if
    you have not yet filed a 2019 return, fill it out, and compute the value). If this
    amount is over $100,000, reduce it to $100,000. If this amount is zero or less,
    you are not eligible for a PPP loan.
  • Step 2: Calculate the average monthly net profit amount (divide the amount from
    Step 1 by 12).
  • Step 3: Multiply the average monthly net profit amount from Step 2 by 2.5.
  • Step 4: Add the outstanding amount of any Economic Injury Disaster Loan
    (EIDL) made between January 31, 2020 and April 3, 2020 that you seek to
    refinance, less the amount of any advance under an EIDL COVID-19 loan
    (because it does not have to be repaid).
How do I apply for forgiveness?
There are two different applications. Your bank can help you determine which is right for your situation.
EZ Forgiveness Application: For those who fit in the below categories
  • Self-employed with no employees; OR
  • Those who did not reduce the wages of their employees by more than 25%, and did not reduce the number or hours of their employees; OR
  • Those who have experienced reductions in business activity as a result of health directives related to COVID-19, and did not reduce the wages of employees by more than 25%
Full Forgiveness Application: For all others who don’t apply to the categories above.


What utilities can I use the funds on?
You can pay for electricity, gas (heating supply), water, transportation, telephone, or internet access for which service began before February 15, 2020.  

Do independent contractors count as employees for purposes of loan forgiveness?
No, independent contractors have the ability to apply for a PPP loan on their own so they do not count for purposes of a borrower’s PPP loan forgiveness.


If I apply for a PPP, can I still apply for other SBA loans?
Yes. However, you cannot use your PPP loan for the same purpose as your other SBA loan(s). If you received an SBA EIDL loan, you can apply for a PPP loan. If your EIDL loan was not used for  payroll costs, it does not affect your eligibility for a PPP loan. If your EIDL loan was used for payroll costs, your PPP loan must be used to refinance your EIDL loan. Proceeds from any advance up to $10,000 on the EIDL loan will be deducted from the loan forgiveness amount on the PPP loan.

More information on the Economic Injury Disaster Loan
These grants provide an emergency advance of up to $10,000 to small businesses and private non-profits harmed by COVID-19. The EIDL program also provides low-interest, long-term loans. More information here.