By: rkapur
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The SBA Paycheck Protection Program (PPP)

On 2020, small business owners across the country were forced to face an unprecedented situation: a pandemic. Practically the entire country was under stay at home orders. Things got better for a while. But then, cases started to spike again during a winter wave.

Back when the pandemic started, Dr. Anthony Fauci, who many regard as the country’s top medical expert on COVID-19, said that even stricter measures are needed if the disease is to be effectively controlled. He was not wrong.

For small business owners, this meant that they saw a slowdown in sales, negative cash flows, and mounting losses. The Government responded with the CARES Act and the first round of COVID relief, which included the Payment Protection Program. 

While the help was appreciated, it didn’t last forever. But that doesn’t mean you can’t access the capital you need!

Camino Financial helps small business owners 24/7 through thick and thin. Our small business loans were designed to help small business owners by offering from $5,000 to $400,000 with fixed monthly payments.

We’re ready to help you strengthen your business!

Apply For A Business Loan!


Everything you need to know about the PPP

Essentially, this program provides small business owners with financial aid and relief. Here’s what you should know about this program:

What is the PPP?

PPP stands for Payment Protection Program, and it’s just, and expansion of an already existing program of the SBA.

PPP is a forgivable loan offered that can give you up to 250% of your monthly payroll costs during a specified period.  Sole proprietors or independent contractors are also eligible but the calculation of loan amount is based on wage, commission, income, or net earnings.

For the first round, the loan was forgivable up to 8 weeks of payroll and other costs, and remaining loan payments were deferred for up to 6 months. For the second PPP round, you can set your covered period (between 8 and 24 weeks).

Some of the additional costs cover the Second Payment Protection Program covers are operations expenditures, property damage costs, supplier costs, and worker protection expenditures.

The Second Round has allocated $15 billion specifically for live venues, independent movie theaters, and cultural institutions.

The funds for this program are provided by approved SBA lenders who will provide SBA COVID-19 loans. The list of the financial institutions you can borrow from includes banks, credit unions, fintechs, and now, during the second round, maybe even community-based lenders.

How much can you borrow? 

First RoundPPP loans are limited to a sum of $10 million. However, the amount that you can borrow is restricted to:

  • If you were in business between 2/15/2019 and 6/30/2019: Your max loan is equal to 250% of your average monthly payroll costs during that period
  • If you were not in business between 2/15/2019 and 6/30/2019: Your max loan is equal to 250% of your average monthly payroll costs between 1/1/2020 and 2/29/2020

For this calculation, payroll cost is capped at an annualized $100,000 per employee. 

Second RoundPayment Protection Program loans are limited to a sum of $10 million. However, the amount that you can borrow is restricted to:

  • Your max loan is equal to 2.5 times your average monthly payroll costs during 2019, 2020, or the year prior to the loan.

For this calculation, payroll cost is capped at an annualized $100,000 per employee.

What can the money be used for? 

SBA COVID-19 loans under the Paycheck Protection Program are primarily meant to help you meet your payroll costs (hence it’s name). You can also use the money for other approved non-payroll expenses.

Do you need to pay the money back? 

The Treasury Department has explained that loans under the Paycheck Protection Program can be forgiven provided that the money you receive is spent on payroll costs, mortgage interest, rent, and utility costs over the 8 weeks after the loan is made.

There’s another condition, as well. You must use at least 75% of the loan amount for payroll expenses.

The loan won’t be forgiven if you do not maintain your staff and payroll. What you need to do for it to remain forgivable:

  • Number of Staff: Keep your full-time employee headcount. If you reduce it, your loan forgiveness will be reduced.
  • Level of Payroll: Don0t decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019. If you do, your loan forgiveness will also be reduced.
  • Re-Hiring: For the First Round, if you had to fire employees or changed salary levels between February 15, 2020, and April 26, 2020, employers had until June 30, 2020, to restore those changes. If they didn’t, the forgiveness was reduced.

What’s the interest rate that PPP loans carry? 

Originally, for the First Round, the rate was 0.5%, but then it was raised to 1%. The loan is repayable in 2 years. Loan payments will be deferred for six months. The Second Round is expected to have the same interest rate.

Applications for SBA COVID-19 loans under the Paycheck Protection Program don’t require you to provide collateral or provide a personal guarantee. 

Biden’s changes to the PPP

Here are the 5 changes that made it easier for all business owners to access this program:

  1. Starting Wednesday, Feb 24th, the SBA will be processing applications from business with no more than 20 employees for 14 days. That means that they’ll be prioritizing small business owners.
  2. For independent contractor, self-employed and sole proprietors, the “formula” on how to calculate the PPP loan size will change, net income will no longer be valid, now the base will be total sales (up to 100k). What if you already submitted your application? You can go to your bank and apply to cover the gap.
  3. People with a felony were not eligible for PPP. But for this new process, only people with a fraud felony will be excluded.
  4. If a business owner had debt due to a student loan, they weren’t eligible. Now, this clause has been eliminated, even if the loan status is delinquent.
  5. The big one! PPP has been opened for ITIN holders (non-citizens who are lawful US residents – it may not cover all ITIN applicants).

Important Updates

  • March 27, 2020. The U.S. government responded to the coronavirus crisis with the CARES Act, which included a $2 trillion stimulus package (these funds will be broken out between several programs, including healthcare ones). One of the programs within the CARES Act is the $349 billion Paycheck Protection Program (PPP).
  • July 1, 2020. Originally, the deadline to apply for the PPP was June 30, 2020, but the House passed a bill that extended the deadline to August 8, 2020.
  • September 9, 2020. Gov. Gavin Newsom signed a bill into law, which allows business owners in California to exclude their PPP from their state taxes gross income statement. This safeguards businesses’ finances from any future tax increase that could be made to this government program.
  • December 20, 2020. Congress reached a $900 billion new COVID relief package that includes a new $284 PPP.
  • December 22, 2020. President Trump wants Congress to increase the amount of the stimulus check from $600 to $2,000 per person, and he has suggested he won’t sign the current bill unless that change is made.
  • December 27, 2020. President Trump signed the bill even though the changes he demanded were not made.
  • May 31, 2021. The Paycheck Protection Program officially ended.

But even if the PPP loan program ended, you can still finance your business.

Get Approved For A Loan Today


The Payment Protection Program application process

To apply to the PPP, you needed to fill an application.

Depending on the financial institution you’re using to apply, you might complete the SBA’s application form or one specific to that institution. Whatever the situation is, we recommend you familiarize yourself with the SBA’s application.

PPP First Draw Borrower Application Form

PPP Second Draw Borrower Application Form

PPP Second Draw Borrower Application Form (for Schedule C Filers Using Gross Income)

Your application will need to provide details about your company’s monthly payroll. The Paycheck Protection Program Borrower Application Form will ask you to furnish the following information:

  1. What’s your average monthly payroll?
  2. How many employees do you have?
  3. What do you intend to do with the money you borrow? You need to specify the amount you will deploy for payroll, lease/mortgage interest, utilities, and other purposes (it’s necessary to provide details).

You’ll also need to submit your payroll documentation. 

You need to present this information and application form with a certified SBA lender. SBA has a free referral service tool called Lender Match to help find a lender near you

What if you are a sole proprietor or a self-employed individual?

The documents required to be eligible for SBA COVID-19 loans include your payroll tax filings and the details of income and expenses from your sole proprietorship. 

How soon can you apply? 

First RoundApplications for small businesses with less than 500 employees and sole proprietorships opened on April 3, 2020.

Independent contractors and self-employed individuals can apply from April 10 onwards. 

The last date for applications is August 8, 2020. 

Second RoundFor small businesses:

  • If you didn’t get a PPP on the First Round, you can apply starting on Monday, January 11, 2021.
  • If you did get a PPP on the First Round, you can apply starting on Wednesday, January 13, 2021.

For larger businesses:

  • There’s still no application date.

Like in the First Round, you can expect that these SBA COVID-19 loans will be provided on a first-come, first-served basis because of the limited funds the PPP has. 

Here’s a list of all the banks where you can apply for a PPP loan.

How to calculate your payroll costs?

To calculate your average monthly payroll costs, use the following formula:

Payroll costs = Sum of included payroll costs – Sum of excluded payroll costs

Included payroll costs

For employers: 

-Any compensation, like salaries, wages, commissions, and others
-Cash tips
-Vacation and leaves
-Allowance for dismissal or separation
-Health care benefits and insurance premiums
-Retirement benefits
-State and local taxes

For sole proprietors, independent contractors, and self-employed individuals:

-Income that is a wage, commission, income, net earnings from self-employment, or similar compensation lower than a yearly $100,000

Excluded payroll costs:

-Individual employee compensation over a $100,000 annual salary
-Certain taxes
-Any compensation of employees outside the U.S.
-Qualified sick or family leave wages 

What were the requirements? 

Requirements for the Second Round of PPP are expected to be the same as the First Round.

Who can apply for the Payment Protection Program?

  • Small businesses are eligible to apply for SBA COVID-19 loans under the Paycheck Protection Program. A small business is defined as an enterprise with fewer than 300 employees. You can get greater clarity on this issue by checking SBA’s table of size standards.
  • Some large companies could also be eligible for the PPP. If a firm is in the accommodation and food services sector, the 300-employee rule applies to each physical location and not to the whole company.
  • Sole proprietors, independent contractors, and self-employed individuals are also eligible to apply for SBA COVID-19 loans.
  • Other businesses that can apply are: 501(c)(6)s, housing cooperatives, direct marketing organizations, among other types of organizations.
  • The U.S. Treasury Department expects to share guidance in affiliation rules that will make venture-capital-backed companies eligible for this program.

Compared to the First Round, the eligibility has been expanded for nonprofits and local newspapers, TV, and radio broadcasters. There are also some modifications that will ensure that the smallest businesses, as well as restaurants, receive the help they need.

It’s expected that like in the First Round, loan applicants will need to make certain “good faith” certifications to meet the loan requirements. These include:

  • The fact that the current uncertain economic conditions make it necessary to seek a loan to keep the company running.
  • The funds from the Payment Protection Program will be used to meet payroll or other permitted expenses. 
  • If the money is used for an unauthorized purpose, it could make the borrower legally liable for committing fraud.
  • The borrower will apply for only one loan under the Paycheck Protection Program. Multiple loans aren’t permitted. 

Payment Protection Program (PPP) at a glance*

Max Size of Loan$10,000,000
Interest RateFixed 1%
Max Term2 Years
Requirements & Eligibility
  • Businesses and entities must have been in operation on February 15, 2020
  • Less than 300 employees or (ii) be a “small business” under the applicable NAICS code employee size standard, including employee count of Affiliates
  • Eligible Parties
    • Small Businesses, including sole proprietorships, with or without employees
    • Independent contractors
    • Cooperatives and employee-owned businesses
    • Private non-profits
    • Tribal small businesses
    • 501(c)(6)s
    • housing cooperatives
    • direct marketing organizations
  • See guidance on requirements here
Other Considerations
  • The loan amount needs to be calculated
  • Deferred principal and interest payments for 6 up to 12 months
  • Part of this loan may be forgiven and not counted as income to you
How to apply?Apply directly to banks and credit unions. 

There Are Other Financing Options Available

If your small business doesn’t qualify for a COVID-19 loan through the Payment Protection Program, there are other forms of assistance available. 

Economic Injury Disaster Loans (EIDL) 

Another loan program is the Economic Injury Disaster Loan. A small business can get up to $2 million.

Learn more about the EIDL.

Other State and Private Institution Programs

There are many other programs that state governments and private institutions have created.

Learn more about these programs.

The bottom line

Should you apply for an SBA COVID-19 loan under the Paycheck Protection Program? 

Absolutely, yes. 

The PPP offers a low rate of interest of 1%, and loan payments will be deferred for six months. But the most significant advantage is that the loan can be converted into a government grant if you meet the specified conditions. This means it’s forgiven and you don’t have to pay it back. The money that you have borrowed can be retained for your business.

But… what if you aren’t eligible for the Payment Protection Program? 

Unfortunately, many business owners might’ not be able to access the Second Round (just like it happened originally). Either because they don’t fill the requirements or because they weren’t able to fill an application in time (remember, it has a first-come, first-served policy).

If you cannot get the funds you need from the Payment Protection Program, you can still look for alternative sources of financing. At Camino Financial, our motto is “No Business Left Behind,” this means we’ll do our best to provide you with the money you need to ride out the COVID-19 crisis. 

Together we are stronger, let us help you weather the storm.

Apply now!

Read more articles and find some more helpful resources to help you during this crisis:

COVID-19: Small Business Resources

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