Banknotes of the United States of America and a protective mask against the virus. World economic crisis associated with coronovirus. concept: coronavirus SBA Small Business Relief Programs, : payment protection program
By: rkapur
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The SBA Paycheck Protection Program (PPP)

Small business owners across the country are facing an unprecedented situation. Practically the entire country is under stay at home orders. Things could get worse before they get better. Dr. Anthony Fauci, who many regard as the country’s top medical expert on COVID-19, says that even stricter measures are needed if the disease is to be effectively controlled.

What does this mean for America’s small business owners? 

Most of them are likely to see a slowdown in sales, negative cash flows, and mounting losses. 

That’s why the U.S. government has responded to the coronavirus crisis with the CARES Act, which includes 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). 

Important note:

On Sept. 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.

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.

The loan is forgivable up to 8 weeks of payroll and other costs, and remaining loan payments are deferred for up to 6 months.

The funds for this program will be provided by approved SBA lenders will provide SBA COVID-19 loans. The list of the financial institutions you can borrow from includes banks, credit unions, and fintechs.

How much can you borrow? 

PPP 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. 

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. 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: If you had to fire employees or changed salary levels between February 15, 2020, and April 26, 2020, you have until June 30, 2020, to restore those changes. If you don’t, the forgiveness will be reduced.

What’s the interest rate that PPP loans carry? 

Initially, the rate was 0.5%, but according to a recent news report, this has been raised to 1%. The loan is repayable in 2 years. Loan payments will be deferred for six months

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

How to apply to the Payment Protection Program

Your application needs 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? 

Applications 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. 

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.

The PPP has limited funds. Consequently, SBA COVID-19 loans will be provided on a first-come, first-served basis. 

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 are the requirements? 

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 500 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 500-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.
  • The U.S. Treasury Department expects to share guidance in affiliation rules that will make venture-capital-backed companies eligible for this program.

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 PPP 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 Rate Fixed 1%
Max Term 2 Years
Requirements & Eligibility
  • Businesses and entities must have been in operation on February 15, 2020
  • Less than 500 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
  • 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, see more detail here
How to apply? Apply directly to banks and credit unions. 
Turnaround time
  • Treasury Secretary Mnuchin expects same-day turnaround of SBA funds

There Are Other Financing Options Available

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

Economic Injury Disaster Loans (EIDL) 

Another CARES Act 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 PPP? 

Unfortunately, many business owners won’t be able to access this program. 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 for a Camino Financial business loan.


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

COVID-19: Small Business Resources, coronavirus, Camino financial

COVID-19: Small Business Resources

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