How to Do a PPP Loan

Looking for information on how to apply for a PPP loan? Check out this blog post for all the details you need to know!

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What is a PPP Loan?

The Paycheck Protection Program (PPP) loans are part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which was signed into law on March 27th, 2020.

The PPP is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.

The loan is 100% federally guaranteed and forgiven if all employee retention criteria are met.

Loans may be used to cover payroll costs, including benefits, and may also be used to pay for rent, mortgage interest, or utility payments.

How to Qualify for a PPP Loan

In order to qualify for a PPP loan, your business must:

-Be a small business, defined as a business with 500 or fewer employees, or meet the SBA’s size standards for your industry
-Have been in operation on February 15, 2020
-Have paid salaries and payroll taxes
-Show a decline in revenue of 25% or more in any quarter in 2020 compared to the same quarter in 2019

How to Apply for a PPP Loan

If you’re a small business owner or self-employed worker looking for help during the COVID-19 pandemic, you may be wondering how to apply for a Paycheck Protection Program (PPP) loan.

The PPP loan is a government-backed loan that can be used to cover payroll and other business expenses. The loan is 100% forgivable if you use it for its intended purpose, which is to keep your employees on the payroll during the pandemic.

Here’s a step-by-step guide on how to apply for a PPP loan:

1. Check eligibility requirements.

To be eligible for a PPP loan, you must be a small business owner or self-employed worker with a valid Social Security number. You must also have filed or will file a Form 1040 Schedule C for the most recent tax year.

2. Gather required documents.

To apply for a PPP loan, you’ll need to gather some documents, including your most recent tax return, your bank statements from the last three months, and your most recent pay stubs. You’ll also need to provide your company’s legal name, address, and EIN.

3. Choose a lender. ## Actually this says “Choose” not “Expand”

Depending on your business’s size and relationship with its bank, you may want to choose between an SBA-approved lender and a non-SBA approved lender. SBA-approved lenders may have more experience processing PPP loans and may be able to get your loan approved faster. However, non-SBA approved lenders may offer lower interest rates or more flexible repayment terms.

4. Fill out the PPP loan application form .

The PPP loan application form can be found on the Small Business Administration website . The form includes questions about your business’s size, enterprise type (for example, sole proprietorship or limited liability company), and years in operation . You will also need to provide information about your average monthly payroll expenses .

5. Submit your application and supporting documentation .

Once you’ve completed the application form , you’ll need to submit it along with all of the required supporting documentation to your chosen lender .

6. Wait for approval .

Once your application is received by the lender , they will review it and determine whether or not you are eligible for the PPP loan . If you are approved , you will receive the funds in accordance with the terms of your loan agreement .

What Documentation is Needed for a PPP Loan?

Documentation Requirements

To apply for a PPP loan, you will need to complete and submit the Paycheck Protection Program Application Form (SBA Form 2483) to your lender. In addition, you will need to provide the following documentation:

-Payroll documentation illustrating your business’s payroll expenses for the covered period. This can include IRS Form 941 for each quarter in 2019 and 2020, state quarterly tax filings, or bank account statements reflecting payroll expenses.

-Evidence of your business’s employee health insurance and retirement benefits expenses for the covered period. This can include copies of canceled checks, receipts, or bank account statements.

-Documentation verifying your business’s eligible non-payroll expenses for the covered period. This can include copies of canceled checks, receipts, or bank account statements.

How Much Can You Borrow with a PPP Loan?

The PPP loan program is designed to help small businesses keep their employees on the payroll during the COVID-19 pandemic. The loans are 100% forgivable if used for payroll and other eligible expenses, and they can be used to cover up to eight weeks of payroll costs.

So, how much can you borrow with a PPP loan? The answer depends on several factors, including your business’s average monthly payroll costs.

For most businesses, the maximum loan amount is 2.5 times their average monthly payroll costs. So, if your business has $10,000 in monthly payroll costs, you could borrow up to $25,000.

There are some exceptions to this rule. For example, businesses in the hospitality and food service industries may be able to borrow up to 3.5 times their average monthly payroll costs. And businesses with special circumstances (like those that were severely impacted by the COVID-19 pandemic) may be able to borrow more than 2.5 times their average monthly payroll costs.

To calculate your maximum loan amount, you’ll need to calculate your business’s average monthly payroll costs for the 12 months prior to the date of your loan application. This includes salaries, wages, tips, paid leave, and health insurance premiums (but not other benefits).

What are the Terms of a PPP Loan?

PPP loans are forgiveness loans, meaning that if you use the loan for its intended purpose, you will not have to repay the loan. The loan is forgiven as long as you spend the money on approved expenses and maintain your workforce at or above pre-COVID levels for a certain period of time.

To be eligible for forgiveness, at least 60% of the loan must be spent on payroll costs. Up to 40% can be spent on other eligible expenses, which include rent, mortgage interest, and utilities. The forgiven amount is also subject to payroll taxes.

You have 24 weeks from the date you receive the loan to spend the money and qualify for forgiveness. If you do not spend at least 60% of the loan on payroll costs, the entire loan becomes due immediately.

If you laid off employees or experienced a reduction in wages, you may still be eligible for partial forgiveness. You will need to provide documentation showing that you attempted to rehire or bring back employees to their previous wage levels but were unsuccessful.

PPP loans are low interest loans with a 1% interest rate and a 2-year repayment term. If your loan is not forgiven, you will have up to two years to repay it. Loans made before June 5th have a 4-year repayment term.

What is the Forgiveness Process for a PPP Loan?

The process for forgiveness of a PPP loan is as follows:

1. Borrowers will submit a request for forgiveness to their lender;
2. Lenders will review the request and supporting documentation;
3. Lenders will make a decision on the forgiveness request and notify the borrower and SBA;
4. If approved, SBA will remit payment to the lender; and
5. If denied, borrowers will have the opportunity to appeal the decision.

What if You Can’t Afford the Loan Payment?

If you are struggling to make your PPP loan payment, you have a few options. You can contact your lender and request a deferment or forbearance, which will allow you to temporarily stop making payments or make smaller payments. You can also look into refinancing your loan with a different lender.

What Happens if You Don’t Use the Loan for its Intended Purpose?

If you don’t use the loan for its intended purpose, you may have to pay back the loan with interest.

What are the Risks of Applying for a PPP Loan?

There are several risks to consider before applying for a Paycheck Protection Program (PPP) loan. First, the PPP is a first-come, first-served program, so you’ll want to submit your application as soon as possible. Second, the PPP loan is subject to credit approval, so you’ll need to have good credit in order to qualify. Third, the PPP loan may be forgiven if you use it for eligible expenses, but there is no guarantee that your loan will be forgiven. Finally, if you do not use the loan for eligible expenses or do not repay the loan in full, you will be responsible for paying back the loan with interest.