Paycheck Protection Program (PPP)
Disclaimer: This is based on information available as of January 14, 2021. We will continue to update the site as more guidance and information is available.
Congress has reauthorized funding for the Paycheck Protection Program (PPP) through the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act (Economic Aid Act).
While many provisions of the program are the same as when the program was first passed in March last year, there are several important differences. One of the key changes is that businesses who have previously received a PPP loan are now eligible for a second loan.
Read more for more information and key updates to the program.
What is the PPP?
The PPP is a loan program that originated from the Coronavirus Aid, Relief and Economic Security Act (CARES) Act to help small businesses keep their workforce employed during the coronavirus pandemic.
On December 27, 2020 a second stimulus package was signed into law that provided an additional $284.45 billion to reopen the PPP program and allow businesses that used up their first PPP loan to apply for a second.
Am I eligible?
Borrowers in operation on February 15, 2020 and meet one of the following requirements may be eligible:
- Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans
- Sole proprietors, independent contractors, and eligible self-employed individuals
- Accomodation and food service operations with NAICS codes starting with 72( with fewer than 500 employees per physical location
- Sec. 501 (c)(6) entities such as chambers, visitor’s bureaus and destination marketing organizations; and
- News organizations
A borrower is generally eligible for a second loan if the borrower:
- Previously received a first draw loan and will or has used the full amount only for authorized uses.
- Has 300 employees or less; and
- Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.
What can a PPP loan be used for?
At least 60 percent of the loan must be used for payroll and employee benefits costs.
Payroll costs under the PPP include:
- 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; allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health career group life, disability, vision, or dental insurance,including insurance premiums, and retirement
- Payment of state and local taxes assessed on compensation of employees; and
- For an independent contractor or sole proprietor, wages, commissions, income, or net earnings from self-employment,or similar compensation.
The remaining 40 percent can be spent on:
- Mortgage interest payments (but not prepayments or principal payments)
- Interest payments on any other debt obligations incurred before February 15, 2020
- Refinancing an EIDL loan made between January 31, 2020 and April 3, 2020
- Operations expenditures such as accounting or tracking of supplies
- Property damage costs due to public disturbances in 2020 not covered by insurance
- Supplier costs such as cost of goods sold
- Worker protection expenditures to be COVID compliant
How much can I receive?
For first-time applicants, the maximum amount you can receive is the lesser of $10 million or an amount that you will calculate using the payroll-based formula below.
For second-time applicants, the maximum is the lesser of $2 million or an amount that you will calculate using the payroll-based formula below.
How do I calculate my loan amount?
- Under the PPP, the maximum loan amount for First Draw PPP Loans is the lesser of $10 million or an amount that you will calculate using a payroll-based formula authorized by the Act.
- To calculate the payroll-based formula, use the following methodology:
- Step 1: Aggregate payroll costs from 2019 or 2020 for employees whose principal place of residence is the United States
- Step 2: Subtract any compensation paid to an employee in excess of $100,000 on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred.
- Step 3: Calculate average monthly payroll costs (divide the amount from Step 2 by 12)
- Step 4: Multiply the average monthly payroll costs from Step 3 by 2.5.
- Step 5: Add the outstanding amount of an Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020 that you seek to refinance. Do not include the amount of any “advance” under an EIDL COVID-19 loan (because it does not have to be repaid).
- Additional methodologies for specific applicants, such as self-employed, seasonal employers, and farmers and ranchers are available in the SBA’s IFR.
The maximum loan amount is:
- Calculated as the lesser of the product obtained by multiplying the average total monthly payment for payroll costs incurred or paid by the borrower during 2019 or 2020 (at the election of the borrower) by 2.5; or
- $2 million
Note: See pages 27-32 of the IFR for more details, including calculations for seasonal businesses, borrowers who did not exist during the one-year period preceding February 15, 2020, borrowers assigned a NAICS code beginning with 72, farmers or ranchers, borrowers with income from self-employment, borrowers that file taxes as a partnership, and businesses that are part of a single corporate group.
When can I apply?
The SBA and Treasury announced Friday, January 8th that the new PPP will re-open the week of January 11 with community financial institutions exclusively allowed to make first-draw PPP loans on starting January 11 and second-draw PPP loans starting January 13.
The PPP will open Friday, January 15 to PPP-eligible lenders with $1 billion or less in assets for first and second-draw applications. The portal will fully open to all participating lenders on Tuesday, January 19.
What’s the application deadline?
March 31, 2021
How do I apply?
Contact your local bank, credit union, or other SBA-certified lender to apply or for more information.
Note: You do NOT have to apply for a second PPP loan with your original lender, however please be aware that it may expedite the process if you do so.
If you wish to begin preparing your application, you can download the following prior to applying with your lender:
Additional Rules and Guidance
SBA has issued the following Interim Final Rules related to the PPP:
- PPP Guidance from SBA Administrator Carranza on Accessing Capital for Minority, Underserved, Veteran, and Women-owned Business Concerns;
- Interim Final Rule on Paycheck Protection Program as Amended by Economic Aid Act
- Interim Final Rule on Second Draw PPP Loans.
Need more information?
For application status inquiries and/or questions about the loan program:
Please contact the SBA at 1-800-659-2955 (TTY: 1-800-877-8339) or email@example.com.
For assistance with completing an application:
Our Florida SBDC disaster recovery specialists provide one-on-one confidential consulting at no cost to help businesses prepare disaster loan applications and assist with other post-disaster challenges. Please note that consultations are taking place via phone call or virtual meeting. Due to the COVID-19 pandemic, we are experiencing high volumes of calls, emails, and requests for consulting. We will work to respond to your request as quickly as possible. We ask that you remain patient during this time and we’ll be in touch with you as soon as possible.
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