Paycheck Protection Program (PPP)

Recently added as an SBA loan program, the Paycheck Protection Program provides federally-guaranteed loans to eligible small businesses. Loans can be up to $10 million and may be partially forgivable. These loans are intended to help small businesses retain employees throughout and after the Coronavirus (COVID-19) crisis.

As dictated by the CARES Act, the SBA will commit to helping small business owners across America borrow $349 billion. The Paycheck Protection Program covers operational expenses for an 8-week period, beginning February 15, 2020 and ending on June 30, 2020.

Should I Apply for a Paycheck Protection Program (PPP) Loan?

Will I have to personally guarantee a PPP loan or put up collateral?

NO

Does my business qualify for the PPP?

1. Were you in operation on 2/15/20? 

2. Do you have between 1 - 500 employees?

Your business does not qualify

NO

YES

How much of the loan will be forgiven?

2.5x your average monthly payroll costs up to $10 million

How much will I qualify for?

Your business qualifies

The amount you spent on:

1. Payroll costs

2. Rent

3. Utilities

4. Interest on past debt

Multiply that amount by the % of average monthly full-time employees you employed during the COVID crisis compared to the *past

What happens to the remaining amount, if any?

Big Takeaway: Apply Now!

Where do I apply?

Any SBA-approved bank.

Where can I get more details?

We recommend you contact your banking institution.

You repay the loan on these terms:

1. Up to 2 year term

2. Max of 1% interest rate

3. 6 month deferred before any payments are due

Key Benefits of the PPP Loan:

Any qualified small business, nonprofit organization, veterans organization, or tribal business is eligible to review a loan if the business employs 500 or less people

100% Loan Forgiveness

For qualified loan uses like payroll costs and most mortgage interest, rent, and utility costs over the 8 week period after the loan is made

Low Interest Rate

Maximum rate of 1% fixed rate for the entire life of the remaining loan amount that isn’t forgiven

6 Month Payment Deferral

All payments are deferred for 6 months

What can the PPP Loan be used for?

  • Payroll costs and employee commissions or similar compensations

  • Insurance premiums and group healthcare benefits during paid sick, family, or medical leave

  • Mortgage interest payments (but not prepayment or payment of mortgage principal)

  • Commercial space rent and utilities

  • Interest on any other debt obligations incurred before the covered period

How to apply for the PPP loan?

To apply for the PPP loan, contact an SBA qualified bank. The bank provide you with the loan application and necessary documentation you will need to submit. There are resources provided below that can be helpful to you as you prepare the documents you need to submit the loan. 

When should I apply for the PPP loan?

You can submit your loan application on Friday April 3rd. You should apply as soon as possible. The SBA has guaranteed loans up to $349B for small businesses. Once that monetary threshold is reached, absent further Congressional action, no further loans could be guaranteed. This means you should be applying as soon as you can so your business can be included in the loan program.

What else should I know about this loan?

The PPP loan was created so small businesses could pay its employees. To be considered for loan forgiveness, an employer must keep employee and compensation levels maintained. This may mean you will need to rehire employees that have been laid off or furloughed. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.

I’m a venture backed company, can I apply for this loan?

A big question for venture backed companies has been the affiliate rule. There has been recent news that the affiliate rule will no longer be an issue for venture backed companies in the coming days. Please stay tuned to updates and rely on your lawyer’s guidance for the affiliate rule as there are many complications and grey areas.

Additional Resources:

Small Business Guide and Checklist

US Treasury Info Sheet

Holland & Hart Loan Overview

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