How to Apply for a PPP Loan

The Paycheck Protection Program (PPP) is a loan designed to help small businesses keep their employees on the payroll during the COVID-19 pandemic.

If you’re a small business owner who is interested in applying for a PPP loan, here’s a step-by-step guide on how to do it.

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What is a PPP Loan?

What are the eligibility requirements?

To be eligible, you must:
– Have been in business as of February 15, 2020
– Employ no more than 500 workers (or the maximum employees allowed under the small business size standard as designated by the SBA for your industry)
– Have experienced a decrease of at least 25% in gross receipts in any quarter in 2020 compared to the same quarter in 2019.

How to Apply for a PPP Loan

The Paycheck Protection Program (PPP) loans are part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was passed by Congress and signed by the president in late March 2020. These loans are designed to help small businesses keep their workers employed during the COVID-19 pandemic. If you’re a small business owner who is interested in applying for a PPP loan , here’s what you need to know.

SBA Application Portal

The SBA Application Portal is open to all eligible lenders. You can apply for a PPP loan by completing the online form on the SBA website.

You will need to provide the following information:

-Lender information, including contact information
-Borrower information, including contact information and business Employer Identification Number (EIN)
-Loan amount requested
-Requested loan terms
-Use of loan proceeds
-Certifications and assurances

Lender Application

In order to apply for a PPP loan, you will need to work with a lending institution that is participating in the program. You can find a list of participating lenders on the SBA’s website.

Once you have found a lender, you will need to complete and submit an application. The application form is available on the SBA’s website.

The lender will then review your application and supporting documentation to determine if you are eligible for a PPP loan. If you are eligible, the lender will forward your application to the SBA for approval.

The SBA will review your application and supporting documentation and make a determination on whether or not you will receive a loan.

If your loan is approved, the funds will be disbursed to your lender who will then work with you to disburse the funds to your business.

Documentation Requirements

Payroll Documentation

To apply for a PPP loan, you will need to provide payroll documentation. This can include:
-Payroll reports from your accounting software
-Bank statements
-Payroll processor reports
-Forms 941 and 940
-State unemployment insurance tax reports

Non-Payroll Documentation

Depending on your business structure and payroll provider, you will need to provide different documentation to prove your payroll expenses.

Sole proprietors and single-member LLCs that file a Schedule C with their personal tax return can use Form 1040 Schedule C line 31, “Profit or loss from business.” If you have employees, in addition to Form 1040 Schedule C, you will need to provide either:
-IRS Form 941 for the most recent quarter
-IRS Form 940 for the year

Partnerships can use IRS Form 1065 “Schedule K-1,” line 14c, “Partner’s distributive share of income from partnerships” or line 20c, “Partner’s distributive share of other comprehensive income (loss).” Small business corporations (S corps) can use 1120S “Schedule K-1,” line 20a, “Shareholder’s distributive share of income.” For larger C Corporations that have filed IRS Form 1120, you’ll need to include line 27, “Income before extraordinary items and cumulative effects of changes in accounting principles.”

Loan Forgiveness

The Paycheck Protection Program offers loan forgiveness for retaining employees by temporarily expanding the traditional SBA 7(a) loan program. Under this program, you may be eligible for loan forgiveness equal to the amount you spend on payroll, mortgage interest, rent, and utilities during the covered period.

What expenses are eligible for loan forgiveness?

The SBA’s Loan Forgiveness Application instructs borrowers to submit documentation verifying the eligible payroll and non-payroll expenses for which they are requesting forgiveness. Eligible payroll costs include:

-Salary, wage, commission, or tip compensation
-Employee benefits including costs for vacation, parental, family, medical or sick leave
-Allowance for separation or dismissal
-Payment of state and local taxes assessed on employee compensation
-For a sole proprietor or independent contractor: Wages, commissions, income, or net earnings from self-employment (subject to capped amounts)

Eligible non-payroll expenses include:

How to apply for loan forgiveness?

If you received a Paycheck Protection Program (PPP) loan from a participating lender, you may be eligible for loan forgiveness. To apply for forgiveness, you (the borrower) must submit a Loan Forgiveness Application to your lender. Be sure to review the instructions for the application and supporting documentation carefully before submitting these to your lender.

Your lender will have specific guidance on how to complete the application and submit it for forgiveness, including any required supporting documentation. This information will be made available on www.sba.gov/ppp.

The following provides general guidance on how to complete the Loan Forgiveness Application and what supporting documentation you will need to submit with your application. You should carefully review this information and consult with your accountant or attorney to ensure you complete the Application and gather all required supporting documentation prior to submission.

You will need to provide:
-- Personal identifiable information for each owner of 20% or more of the business entity who submitted the PPP Loan Application Form
-- The highest total amount of payroll costs incurred and paid by the business entity between Jan 1, 2020 and Dec 31, 2020 NOTE: If your PPP loan was made before June 5, 2020, you have the option to use an alternative payroll covered period that begins on the date your loan was made and ends no later than 24 weeks (168 days) after that date
-- Documentation verifying payroll costs incurred during the applicable covered period Information may include: Bank account statements or third-party payroll service provider reports documenting transfers of payroll funds from borrower’s account; IRS Form 941 (Quarterly Federal Tax Return); state quarterly business and individual employee tax filings; or payment receipts, cancelled checks or account statements documenting eligible cash compensation paid NOTE: You must retain all required documentation in your records in order to support your loan forgiveness application
-- Documentation verifying any eligible non-payroll expenses incurred during the applicable covered period Information may include: Cancelled checks or payment receipts; bank account statements; or documentation from your bookkeeper/accountant/Paypal Documentation confirming employer contributions made toward employee health insurance premiums during the covered period Documentation confirming employer contributions made toward employee retirement savings during the covered period NOTE: You must retain all required documentation in order to support your loan forgiveness application
-- A certification from a representative of your business entity that is authorized to certify that the information provided in this application and all accompanying documents is true and accurate in all material respects
-- Your PPP Schedule A Worksheet completed by you or your representative

FAQs

The Paycheck Protection Program (PPP) loan is a loan designed to help small businesses keep their workers employed during the COVID-19 pandemic. The PPP loan is part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which was passed by Congress in March 2020. If you’re a small business owner who is interested in applying for a PPP loan, here are some frequently asked questions that may help you.

What if I have already laid off employees?

If you have already laid off employees or reduced their hours or pay, you can still apply for a PPP loan. You will need to rehire any laid-off employees or restore their hours and wages to their previous levels in order to qualify for loan forgiveness.

What if I can’t afford to rehire all of my employees?

The SBA has released information stating that if you can’t afford to rehire all of your employees, you can still apply for a PPP loan. You will need to show that you have tried to rehire as many employees as possible and have been unable to do so.