COVID-19: PPP Loans

Paycheck Protection Program,
EIDL Disaster Loan Recovery
How to Apply, Loan Calculation
and More...

The first thing you need to know about PPP loans is that they are not direct loans from the feds. They’re more like an SBA 7(a) loan.

SBA is guaranteeing 100% percent of these loans, but they will be made through SBA-approved lenders. Its important to know that many banks are overwhelmed so we have a list of Banks we have directly been working with to support the needs of our client base.

And your SBA lender will service your loan. Also, PPP loans are in fact “first-come, first-served”.

You can get both EIDL disaster loan and PPP paycheck protection program loans, but their proceeds can’t be used for the same purpose. You can refinance your EIDL loan into a PPP loan.

The CARES Act said that the the full principal amount of the loan and any accrued interest can be forgiven if you use all of the loan proceeds for forgivable purposes and employee and compensation levels are maintained.


Remember, payroll is the priority here — it’s called the Paycheck Protection Program. The whole point of these loans is to keep the lights on in your business and to keep people working.

In light of this, the SBA and the Treasury Department have said that no more than 25% of the loan forgiveness amount may be attributable to non-payroll costs.

The first day to apply for a PPP is, April 3, and this program is running through June 30 or until funds are exhausted.

Now although today is the official “start date” for PPP, most SBA lender banks are not ready, especially the old school brick and mortar banks.

Here are the Eligibility Requirements for PPP Loans:

To calculate your maximum loan amount, take your payroll costs from the last twelve months for employees whose principal place of residence is the United States. Subtract any compensation paid to an employee in excess of an annual salary of $100,000. If you’re a one-man or one-woman show who doesn’t have payroll but just has self-employment income, subtract any of your earnings that are in excess of $100,000 for the last twelve months.

Then you have that number, those total payroll costs less amounts greater than $100,000. Divide that number by 12.
Multiply that new number by 2.5.

Add the outstanding amount of any EIDL disaster loan that you received between January 31, 2020 — that’s when the “disaster” began — and April 3, 2020. This is EIDL received, not applied for. I doubt many of you have actually received an EIDL right now.

The definition of payroll costs for PPP is broad, including:

PPP loan proceeds can be used for:

Loan Amount
  • Up to 2.5 months of payroll cost¹ maximum of $10 million
  • Up to $2 million, based on actual economic injury determined by SBA
Loan Term
  • Up to 10 years by statute, but SBA indicates most loans will be 2 years
  • Up to 30 years
Eligible Borrowers
  • All small businesses in operation as of 2/15/20 with fewer than 500 employees²
  • All SBA qualified small businesses
  • NAICS 72 sector businesses (Accommodations and Food Service) with not more than 500 employees per location
  • 501(c)(19) veteran groups, 501(c)(3)s, and tribal businesses with fewer than 500 employees
  • Self-employed individuals
  • Independent contractors
  • Sole proprietorships
  • All SBA qualified small businesses
  • Private nonprofit organizations
  • ESOPs fewer than 500 employees
  • Independent contractors
  • Sole proprietorships
  • Tribal businesses
Application Process
  • Issued directly by SBA -approved banks
  • Loan fees waived
  • Most banks to start accepting applications 4/3/20 or the week of 4/6/20″
  • Issued by the SBA, approval solely on credit score and financial need
  • Loan fees, requirement to show need, and one -year of operations waived
  • No collateral
  • Collateral required for loans more than $25,000, but SBA is waiving collateral requirements in many cases
Personal Guaranty
  • No personal guaranty
  • Required for loans more than $200,000, by owners of greater than 20%
  • 4% capped by statute, with SBA indicating most loans will charged 1%
  • 3.75% for businesses; 2.75% for nonprofits.
  • SBA will provide eight weeks of loan forgiveness for funds applied to payroll cost, mortgage interest, rent, and utility expenses incurred after receiving funding³
  • SBA may provide up to $10,000 in emergency grants to EIDL applicants that need it
  • Applicants do not need to repay the grants even if the loan application is denied , but grants will be credited towards the maximum forgivable amount under any PPP loan ⁴
Deferred Payments
  • Automatic deferral of principal/ payments for six months interest
  • Automatic deferral of principal/interest for all of 2020; up to one year after receiving funding³
  • Payroll costs, mortgage interest, rent, and utility expenses
  • Working capital, inventory, equipment purchases, real estate payments, and other operating expenses
  • Available only until 6/30/20
  • Grants only available until 12/31/20

CARES Act Paycheck Protection Program SBA Loan Application

Average Monthly Payroll is mutiplied 2.5x + EIDL, Net of Advance(If Applicable) to equal the Loan Request Amount
Purpose Of Loan
If Question (1) or (2) below are answered "Yes," the loan will not be approved.
1. Is the applicant or any owner of the Applicant presently suspended, debarred, proposed for debarment, declared ineligible, voluntarily excluded from participation in this transaction by and Federal Department or agency, or presently involved in any bankruptcy?
2. Has the applicant, any owner of the Applicant, or any business owned or controlled by any of them, ever obtained a direct or guaranteed loan from SBA or any other Federal agency that is currently delinquent or has defaulted in last 7 years and caused a loss to the government?
3. Is the applicant or any owner of the Applicant any owner of any other business, or have common management with, any other business? If yes, additional details will need to be added in an addendum upon application submission.
4. Has the Applicant received an SBA Economy Injury Disaster Loan between January 31,2020 and April 3,2020? If yes, additional details will need to be added in addendum upon application submission.
If Question (5) or (6) below are answered "Yes," the loan will not be approved.
5. Is the Applicant(if an individual) or any individual owning 20% or more of the equity of the Applicant subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction, or presently incarcerated, or on probation, or in parole?
6. Within the last 5 years, or any felony, has the Applicant (if an Individual) or any owner of the Applicant 1) been convicted; 2) pleaded guilty; 3) pleaded nolo contendere; 4) been placed on pretrial diversion; or 5) been placed on any form of parole or probation(including probation before judgment)?
7. Is the United States the principal place of residence for all employees of the Applicant included in the Applicant's payroll calculation above?
8. Is the Applicant a franchise that is listed in the SBA's Franchise Directory?

Our Office

Partner With Us For Any Of Your Accounting Needs

Sign up for a free trial.

Copyright © 2019 BookkeeperLive. All rights reserved.