How Do You Qualify for a PPP Loan?
- SBA Loan Basics
- PPP Loan Basics
- PPP Loan Forgiveness
If you’re a small business owner, you may be wondering how you can qualify for a PPP loan . Here’s a quick overview of the requirements and how to apply.
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SBA Loan Basics
The PPP loan is a loan that is given to small businesses in order to help them with the financial burden of COVID-19. The loan is given by the Small Business Administration (SBA) and is 100% federally guaranteed. In order to qualify for the loan, your business must have less than 500 employees and must have been in operation for at least two years.
What is an SBA loan?
The Small Business Administration (SBA) is a federal agency that provides support to small businesses and entrepreneurs. One of the ways they do this is by guaranteeing loans from approved lenders, which makes it easier for small businesses to get funding.
SBA-guaranteed loans are divided into two main categories: 7(a) loans and 504 loans. 7(a) loans are the most common type of SBA loan and can be used for a variety of purposes, including working capital, equipment, and real estate. 504 loans are specifically for the purchase of major assets such as real estate or machinery, and they tend to have lower interest rates than 7(a) loans.
To qualify for an SBA-guaranteed loan, you will need to meet the requirements of the lender as well as the SBA. In general, you will need to have good credit, a strong business plan, and adequate collateral. The SBA also has certain size standards that businesses must meet in order to be eligible for their programs.
What are the different types of SBA loans?
The Small Business Administration (SBA) offers several different loan programs to help small businesses get the financing they need. SBA loans are made through banks, credit unions, and other lenders that participate in the SBA’s 7(a) program.
The most common type of SBA loan is the 7(a) loan, which can be used for a variety of purposes, including working capital, refinancing, equipment, and real estate. Other types of SBA loans include the 504 loan program for large equipment or real estate purchases, and the disaster loan program for businesses that have been impacted by a natural disaster.
To qualify for an SBA loan, you will need to have good credit and a strong business plan. You will also need to provide collateral for the loan, which can be in the form of property or equipment.
What are the eligibility requirements for an SBA loan?
There are a number of factors that will be considered when determining whether or not you are eligible for an SBA loan. Some of these factors include:
-Your credit score
-Your debt-to-income ratio
-Your business history
-The type of business you have
-Your ability to repay the loan
In general, you will need to have strong credit and a good history of repayment in order to qualify for an SBA loan. The better your credit score and repayment history, the higher the chances that you will be approved for a loan.
PPP Loan Basics
The PPP loan is a government-backed loan designed to help small businesses keep their workers employed during the COVID-19 pandemic. The loan is 100% forgivable if the borrower uses it for payroll and other qualifying expenses. But how do you qualify for a PPP loan?
What is a PPP loan?
A Paycheck Protection Program loan is a type of government-backed loan designed to help small businesses and self-employed individuals keep their businesses afloat during the COVID-19 pandemic.
The loan is 100% guaranteed by the Small Business Administration (SBA), meaning that if you default on the loan, the SBA will cover the entire amount. The loan is also 100% forgivable, meaning that as long as you use the loan proceeds for eligible expenses (e.g., payroll, rent, utilities), you will not have to repay the loan.
To qualify for a PPP loan, you must have a small business that employs 500 or fewer employees. You must also have been in business as of February 15, 2020 and must have paid salaries and payroll taxes during that time period.
What are the eligibility requirements for a PPP loan?
To be eligible for a PPP loan, you must:
-Be a business, nonprofit, veterans organization, or tribal business with fewer than 500 employees
-Have been in operation on February 15, 2020
-Have paid salaries and payroll taxes
-Show a 25% reduction in gross receipts in the first quarter of 2020 compared to the first quarter of 2019
How do you apply for a PPP loan?
There are a few different ways to apply for a Paycheck Protection Program (PPP) loan.
The first way is to apply through your local bank or credit union. Many small banks and credit unions are participating in the PPP program, so this is a good option if you have an existing relationship with a financial institution.
The second way to apply is through an online lender. There are several online lenders that are participating in the PPP program, so this is a good option if you don’t have an existing relationship with a bank or credit union.
The third way to apply is through the Small Business Administration (SBA). The SBA is administering the PPP program, so this is a good option if you want to apply directly to the government agency responsible for the program.
To qualify for a PPP loan, you must be a small business owner or self-employed person with eligible payroll costs. You will also need to provide documentation of your payroll costs, such as payroll tax filings or bank statements.
PPP Loan Forgiveness
You may be eligible for forgiveness of all or part of your PPP loan if you spend the loan funds on eligible payroll and non-payroll costs during the covered period, and you do not reduce the number of full-time equivalent employees or salary/wages of any employee by more than 25% during the covered period compared to the prior year.
What is PPP loan forgiveness?
The Paycheck Protection Program (PPP) loan forgiveness process is designed to help small businesses and self-employed individuals keep their workforce employed during the COVID-19 pandemic.
To qualify for forgiveness, you must use the loan proceeds for eligible payroll costs, interest on your mortgage, rent, and utilities. At least 60% of the forgiven amount must be used for payroll. You have up to 24 weeks to spend the loan proceeds and you must apply for forgiveness within 10 months after your covered period ends.
The SBA will forgive the remaining balance of your PPP loan if:
-You have used all of the loan proceeds for eligible expenses
-You have met the full-time equivalent employee retention criteria
-You have not reduced salaries or wages by more than 25% for any employee making less than $100,000 annually
-You have not reduced the number of employees or overall pay rates
What are the eligibility requirements for PPP loan forgiveness?
To be eligible for forgiveness, you must use the loan proceeds for eligible payroll costs, covered mortgage interest, rent, and utility payments over the 24-week covered period (orAlternative 16-week period). At least 60% of the loan forgiveness amount must be used for payroll.
Payroll costs are defined as:
-Salary, wage, commission, or tip income of less than $100,000 per employee per year ( prorated for the covered period)
-Employee benefits including costs for vacation, parental, family, medical or sick leave; allowance for dismissal or separation; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit
-State and local taxes assessed on compensation
-For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment; and
-For general partners and self-employed individuals: wages, commissions , net earnings from self-employment (less allowed expenses).
How do you apply for PPP loan forgiveness?
To apply for forgiveness of your PPP loan, you (the borrower) must complete and submit a Loan Forgiveness Application to your lender (or servicer). You can find application forms and instructions on the Small Business Administration’s website.
Borrowers can apply for forgiveness at any time during the covered period. If you apply for forgiveness before the end of the covered period, you can choose to:
– have your payments deferred until SBA remits the decision on your application; or
– continue making payments on your loan.