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Paycheck Protection Program

Get the FAQ’s on the Paycheck Protection Program

Employees are what make businesses thrive and grow.  Many employees have become extensions of their employer’s families and are involved with their everyday life.  What would business owners do without their employees?  This is an unfortunate question that executives are having to face during the COVID-19 pandemic.

With unemployment rates in America at an ultimate high since the 1930s, some businesses are struggling to keep their doors open for just one more day, while others have been forced to close shop.  Businesses are searching for alternative solutions to keeping their employees paid, benefits secured and rent and utilities current.  As of April 3, 2020, businesses are able to apply for the Paycheck Protection Program (PPP), the newest passed program to the CARES Act.  The PPP authorizes up to $349 billion in forgivable loans to small businesses during the COVID-19 pandemic to pay their employees, rent/mortgage, utility costs and employee benefits over an 8-week period.  Here are some of the key takeaways of the program.

*Please note that this program is currently unavailable until further funding is established.  An update will be made with new information on the funds when they become available.  The below is an overview of the program as it stands prior to additional funding.

When to apply?

  • Small Businesses: On April 3, 2020 businesses with less than 500 employees are eligible to submit applications for the PPP through existing SBA lenders.
  • Independent Contractors and Self-Employed Individuals: On April 10, 2020, individuals are eligible to submit applications for the PPP through existing SBA lenders.

Where to apply?

  • Applications can be submitted through any federally insured depository institution, federally insured credit union, Farm Credit System and through any existing SBA lender.

Who can apply?

  • All businesses with fewer than 500 employees are eligible to apply. Some businesses in certain industries can have more than 500 employees if they meet certain standards from the SBA.  Here is more information on these industries.

What is needed to apply?

  • Submit the online PPP application to an approved lender that is available to process applications by June 30, 2020. Here is a link to the application, be sure to include all payroll documentation with the PPP application.

How long does the program last?

  • The program is open until June 30, 2020; however, it may take time for applications to process so it is recommended to apply as early as possible.

What can the loan be used for?

  • The loan can be used for payroll and benefits costs that include salary wages, commissions or tips (capped at a rate of $100,000 per employee annually), vacation time, parental, family, medical and sick leave as well as state and local tax assessments on compensation. Additionally, this program covers interest on mortgage obligations incurred before February 15, 2020, as well as, rent and utilities.

What about sick leave?

  • Yes, it does cover sick leave, however, please note the CARES Act excludes qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act.

How large is the loan?

  • The loan amount is calculated as 2.5 times each employee’s average monthly payroll costs.
  • Payroll costs consist of compensation to employees (whose principal place of residence is the United States) in the form of salary, wages, commissions or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical or sick leave; an allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums and retirement; payment of state and local taxes assessed on the compensation of employees; and for an independent contractor or sole proprietor, wage, commissions, income or net earnings from self-employment or similar compensation. Payroll costs will still be capped at $100,000 annualized for each employee. For seasonal and new businesses there are different time periods and calculations to follow.
  • There is a $10 million cap.

How much of the loan will be forgiven?

  • Any amounts used for payroll costs, as defined above, rent, mortgage interest and utilities for the 8-week period following the funding of the loan will be forgiven. In the event an employer uses the funds for anything other than payroll, mortgage, rent and utilities, they will need to repay the loan under the defined terms. Repayment on the loan can also occur if employers make major employee and business changes and do not maintain staff.

What is the interest rate?

  • The PPP has a fixed interest rate of 1%.

When is the loan due?

  • The loan has a monthly payment term of over 24 months.

Does collateral need to be put down?

  • No collateral is required for the PPP.

What is needed to certify?

  • There are a few certification requirements during the application process. The first being the business’ current economic uncertainty that makes the loan necessary to support business operations.  Second is that the funds will be utilized in the retention of employees to cover the cost of payroll and make rent/mortgage payments.  Third, the business has not received another loan under this program.  Fourth, the business provides documentation to the lender that verifies the number of full-time employees on payroll and the dollar amounts. Fifth, all the documentation is accurate and there is no false information. Lastly, the lender will calculate the loan amount using the tax documents submitted, and the business owner will confirm they are the same as what was submitted to the IRS.

The Paycheck Protection Program is a great opportunity for SMB’s to cover costs during this volatile time to keep their physical doors open and pay the people that run the business’s daily operations.  For more information about the program please visit the treasury website.

  • Resources
  • Small Business Relief