The Paycheck Protection Program (PPP) provides small businesses and sole proprietorships cash flow assistance through 100% federally guaranteed loans. The PPP is intended to encourage eligible employers to keep employees on their payroll, despite the economic hardship related to the COVID-19 pandemic. Small businesses may now apply to receive a first-time or second-time forgivable PPP loan. There are certain amounts allocated for smaller borrowers and underserved communities.
APPLICATIONS ARE NOW CLOSED. Existing borrowers may be eligible for PPP loan forgiveness.
Small businesses can have PPP loans fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities. Loans received before, on or after the enactment of the Emergency Coronavirus Relief Act of 2020, excluding those whose loans are already forgiven, are eligible to use the expanded forgivable expenses. Business expenses paid for with PPP funds are now tax deductible. Businesses no longer need to deduct their EIDL Advance from the forgiveness amount. For more information on loan forgiveness, visit the SBA’s website.
For both first and second draw loans, a borrower is eligible for loan forgiveness equal to the amount the borrower spent on the following items during the 24- or 8-week period beginning on the date of the loan’s origination:
Borrowers may elect to calculate eligible costs in an 8-week or 24-week coverage period. The coverage period begins on the date the lender makes the first disbursement of the PPP loan to the borrower. The lender should disburse the loan no later than 10 calendar days from the date of loan approval.
Costs incurred during the covered period, but paid after the period are eligible for forgiveness. Similarly, costs incurred before the covered period, but paid during the period are also eligible.
Alternative Payroll Coverage Period
An employer may elect to use the Alternative Payroll Covered Period to align with its biweekly or more frequent payroll schedule. The alternative period only applies to payroll costs, not nonpayroll costs such as rent. The covered period begins on the date the lender disburses the loan and nonpayroll costs must be paid or incurred during the covered period to be eligible.
When to Apply
First and second draw loan borrowers may apply for loan forgiveness once all loan proceeds the borrower would like to request forgiveness for have been used. Borrowers have until the maturity date of the loan or within 10 months after the last day of the covered period to apply for loan forgiveness.
Some PPP lenders are participating in direct forgiveness. Before applying for loan forgiveness, determine if your lender qualifies for direct forgiveness by reviewing the list of lenders. If your lender is participating, you may apply after August 4, 2021 for direct loan forgiveness through the SBA portal.
For borrowers whose lender is not participating in direct forgiveness, apply for loan forgiveness through the lender who will provide you with the correct form.
For borrowers with loans of $50,000 or less, the SBA and the Treasury Department released a simpler loan forgiveness application. View the $50,000 or less loan forgiveness application here.
Reminder, loan applications are now closed, but the below eligibility and terms have been archived.
First Draw Loans
Several barriers were eliminated:
Borrowers may defer principal and interest payments until the SBA compensates lenders for any forgiven amounts, instead of the previous six month deferral period. Borrowers must apply for loan forgiveness within 10 months of the end of the covered period.
Borrowers loan duration period is five years
There are four types of accepted lenders for PPP loans.
Second Draw Loans
The expanded PPP allows borrowers to apply for a second PPP loan. The expanded PPP allows borrowers to apply for a second PPP loan. The maximum loan amount for the second draw loan is limited to $2 million. Businesses or organizations must have been in operation on February 15, 2020 for a second draw. Loan forgiveness requirements and calculations remain the same.
The Small Business Administration released a frequently asked questions guidance document as its interpretation of the CARES Act, the Flexibility Act and the Paycheck Protection Program Interim Final Rules.