How to Qualify for a PPP Loan
The PPP Loan is a federal loan designed to help small businesses keep their workers employed during the COVID-19 pandemic.
In order to qualify for a PPP Loan, your business must:
-Have 500 or fewer employees
-Have experienced a 25% or more decrease in revenue in 2020 compared to 2019
-Be in an industry that has been impacted by COVID-19
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SBA Loan Basics
As part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Paycheck Protection Program (PPP) loan was established to provide small businesses with funds to maintain their payroll during the COVID-19 pandemic. In this article, we will cover the basics of the PPP loan and how to qualify for one.
What is a PPP loan?
The Paycheck Protection Program (PPP) is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.
The PPP is part of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) passed by Congress and signed by President Trump on March 27, 2020.
The PPP Loans are available through June 30, 2020.
A key component of the CARES Act is the implementation of the Paycheck Protection Program which authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis.All loans will have the same terms:
-No collateral or personal guarantees are required.
-Neither the government nor lenders will charge small businesses any fees.
-Loan payments will be deferred for six months.
-This loan has a maturity of 2 years and an interest rate of 4%.
To qualify for a PPP loan, you must certify that:
-You were in operation on February 15, 2020 and had employees for whom you paid salaries and payroll taxes OR paid independent contractors, as reported on a Form 1099-MISC.
-You are experiencing financial hardship due to the COVID-19 pandemic
What are the requirements to qualify for a PPP loan?
To be eligible for a PPP loan, you must:
-Have been in business as of February 15, 2020
-Have paid salaries and payroll taxes
-Be a for-profit business, nonprofit organization, veterans organization, or Tribal business concern
-Have fewer than 500 employees
-Operate in the United States or be U.S. territories
How to Apply for a PPP Loan
If you’re a small business owner, you may be wondering how to qualify for a PPP loan. The Paycheck Protection Program is a loan designed to help businesses keep their employees on the payroll during the COVID-19 pandemic. To qualify for a PPP loan, your business must have fewer than 500 employees and must have experienced a decrease in revenue of at least 25% in the first quarter of 2020 compared to the first quarter of 2019.
Find a participating lender
The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.
In order to qualify for a PPP loan, you must first find a participating lender. There are many lenders who are participating in the program, including banks, credit unions, and online lenders. You can find a list of participating lenders on the Small Business Administration’s website.
Once you have found a participating lender, you will need to fill out an application and provide documentation of your payroll costs. The most recent payroll statement from your employer will usually suffice. You will also need to provide information on your average monthly payroll costs over the past year.
Once you have submitted your application, the lender will review it and decide whether or not you are eligible for a PPP loan. If you are eligible, the lender will disburse the funds to you in one lump sum. You will then have 24 weeks to use the funds to cover your payroll and other eligible expenses.
Complete the application
Once you have gathered all the necessary documentation, you will need to fill out and sign the applications for the PPP loan. The application is available on the SBA website, and you will need to fill out two forms: the borrower application form and the promissory note.
The borrower application form is relatively straightforward and asks for basic information about your business, such as your business name, address, and contact information. You will also need to provide information about your business’s finances, such as your average monthly payroll expenses.
The promissory note is a legal document in which you promise to repay the loan under certain conditions. You will need to sign this document electronically when you submit your PPP loan application.
Submit required documentation
In order to apply for a PPP loan, you will need to submit the following documentation:
-Your most recent federal tax return
-Your personal financial statement
-Bank statements or accounting records from the last 12 months
-Proof of payroll costs (e.g. pay stubs, tax forms)
You will also need to provide your business’s eligibility information, such as:
-Employer Identification Number (EIN)
-Number of employees on payroll
-Average monthly payroll costs
What Happens After You Apply for a PPP Loan
After you submit your PPP loan application, the SBA will review your application and supporting documents. Once they have verified your eligibility, they will send you a loan authorization form. This form will list the loan amount, interest rate, and maturity date. You will need to sign and return this form before the loan can be disbursed.
The lender reviews your application
After you submit your PPP loan application, the lender will review it to make sure you qualify. To qualify for a PPP loan, you must:
– Be a small business, nonprofit organization, veterans organization, or tribal business with fewer than 500 employees
– Have experienced a decrease in revenue of at least 25% in any quarter in 2020 compared to the same quarter in 2019
– Use the loan for eligible expenses, which include payroll costs, rent, mortgage interest, or utility payments
The SBA guarantees the loan
Once you’ve been approved for a PPP loan, the SBA will guarantee the loan. This means that if you can’t repay the loan, the SBA will pay back the lender. The SBA guarantee makes it easier for small businesses to get loans because lenders know they’re less likely to lose money on these loans.
You receive the loan funds
The SBA will send you the loan funds, minus any fees, within 10 days of your lender’s approval.
You’ll need to start making payments on your loan within six months of the date the SBA disburses the funds to your lender. Your loan maturity date will be two years from the date your loan is fully disbursed.
