It sounds great! A forgivable loan to keep your employees on payroll and help cover other costs such as rent, mortgage interest, or utilities. But should you apply?

How much can I get?

Up to $10 million

Average monthly payroll costs x 2.5 = Loan amount (i.e. $6000 x 2.5 = $15,000)

What is included in payroll costs?

Salary, wages, commissions, or similar compensation, as well as tips, for employees in the United States. (capped at $100,000 annualized for each employee)
Payment for leave (including vacation, parental, family, medical, or sick leave but not those that you get a credit for under the Families First Coronavirus Relief Act) and severance packages
Employee group health care benefits
State and local taxes on compensation (i.e. unemployment taxes)
Payroll costs do not include the money you pay to independent contractors since they can apply for their own PPP loan.
More info on PPP loan for the self-employed here

Great! But how do I calculate “average monthly payroll costs”?

Chase bank had a nice, easy to follow example of how you could calculate your business’s average monthly payroll. Check it out here.

Different banks may require you to use different worksheets to come up with your average (some have excel spreadsheets they’ll have you fill out), so just make sure you follow whatever the lender you are working with asks you to do.

What can I use the loan proceeds for?

Payroll costs, including benefits
Interest on mortgage obligations, incurred before February 15, 2020
Rent, under lease agreements in force before February 15, 2020
Utilities, for which service began before February 15, 2020

How can I get the loan forgiven?

Being organized is KEY! Once you receive the loan money, you have to track for 8 weeks what you spent that money on and then present these documents to your lender. At least 75% of the loan proceeds must be used for payroll costs in order for the loan to be forgiven. Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. NOTE: Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.

What happens when the loan is forgiven? Is that income?

Typically, a loan that is forgiven is treated as taxable income, but this is NOT the case for the PPP. The amount of any forgiven PPP loan will be excluded from gross income.

What if the lender determines the full amount cannot be forgiven?

You have 2 years to pay back the money at a rate of 1%.

Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.

Can I have both the PPP loan and the Coronavirus EIDL loan?

Yes. But you can’t use funds from each loan for the same expenses.

How do I apply for the PPP loan?

Most banks now have updated their websites so you can complete the application online and upload any documents needed. Recommendation: Apply through a bank you already have a relationship with. It may get you funding faster. You can apply from now until June 30th, 2020 but the sooner the better since these funds are limited.

How long before receiving the money?

That is still unclear. Some have said they received their funds within 5 days, others are predicting depending on the bank and amount of applications to go through it could be 3-4 weeks before seeing anything deposited.

Is it worth applying?

Yes, IF you are willing to follow the parameters of the loan to get it 100% forgiven. This would give you 2 months worth of assistance in paying your employees and covering a few other expenses. This loan, in combination with the EIDL (again, as long as you work within the guidelines of the loans), could definitely help to keep your business afloat for the short term.

We want to hear from you! What do you think? What would you like to read about next? Let us know below!

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