How to File for a PPP Loan
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Wondering how to file for a PPP loan? Check out this step-by-step guide that will help you get the funding you need to keep your business afloat.
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What is a PPP Loan?
A PPP loan is a loan that is given to small businesses in order to help them keep their employees during the COVID-19 pandemic. The loans are 100% federally guaranteed and can be forgiven if the business spends the money on certain qualifying expenses, such as payroll or rent.
How to File for a PPP Loan
The Paycheck Protection Program (PPP) loan is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. The PPP loan will be forgiven if all employees are kept on the payroll for eight weeks and the loan is used for payroll, rent, mortgage interest, or utilities.
SBA Application Portal
The Small Business Administration (SBA) has an online application portal for businesses to apply for Paycheck Protection Program loans.
Visit the SBA’s website to begin your application: https://www.sba.gov/ppp
To complete your application, you will need the following information:
-Your business’s tax ID number
-Your business’s bank account information
-Your business’s payroll information from the last 12 months
Lender Application
In order to apply for a Paycheck Protection Program (PPP) loan, you will need to work with a participating lender. You can find a participating lender through the Small Business Administration’s (SBA) Lender Match tool.
Theapplication process will vary depending on the lender you work with, but in general, you will need to provide the following information:
-A completed PPP Loan Application Form
-Payroll documentation, such as tax forms or payroll reports
-Personal financial information for all business owners with at least a 20 percent stake in the company
-Documentation of eligible non-payroll expenses, such as rent or mortgage payments, utility bills, and certain types of employee benefits costs
How to Calculate Your Loan Amount
The PPP loan is a loan that is given to small businesses to help them with payroll and other expenses during the COVID-19 pandemic. To get the loan, you will need to fill out an application and provide some documentation to the lender. The loan amount is based on your average monthly payroll costs.
Average Monthly Payroll Costs
To calculate your loan amount, you will need to know your average monthly payroll costs. You can use your most recent 12 months of payroll data or calendar year 2019 data to calculate this amount. Your loan amount will be 2.5 times your average monthly payroll costs up to a maximum of $10 million.
To calculate your average monthly payroll costs:
1. Add up your total payroll for the year
2. Divide by 12 to get your monthly average
3. Multiply by 2.5 to get your loan amount
For example, if your total payroll for the year was $120,000, your average monthly payroll would be $10,000 and your loan amount would be $25,000.
The PPP Loan Formula
To calculate your PPP loan amount, you’ll need to multiply your average monthly payroll costs by 2.5. The maximum loan amount is $10 million.
Your average monthly payroll costs include:
-Salaries and wages (including tips, commissions, and bonuses)
-Sick leave and paid leave
-Severance pay
-Health insurance premiums
-Retirement benefits
-State and local taxes assessed on employee compensation
What You Need to Include in Your Application
When you apply for a PPP loan, you will need to include some basic information about your business. This includes your business name, address, and contact information. You will also need to include your business tax ID number. If you are a sole proprietor, you will need to include your Social Security number.
Payroll Documentation
When you apply for a PPP loan, you’ll need to provide payroll documentation to your lender. This documentation will be used to verify your payroll expenses and calculate the amount of your loan.
The small business administration has released guidance on what type of documentation you can use to verify your payroll expenses. The guidance says that you can use:
-Payroll reports from your accounting software
-Payroll tax filings
-Bank statements
-Canceled checks
-Payroll processor reports
Tax Forms
The most important thing you will need when applying for a Paycheck Protection Program (PPP) loan is your tax information. The Small Business Administration (SBA) will use this to determine your eligibility for the program.
You will need to provide:
-Your most recent federal income tax return
-Your most recent state and local income tax returns (if you have them)
-Your most recent business property tax return (if you have one)
-Any other tax forms that you think might be relevant
If you do not have all of these forms, do not worry. The SBA will still consider your application if you can provide what you have.
When You Will Receive the Loan Funds
SBA Review Process
The SBA will review your loan application and supporting documentation to ensure that you comply with the program’s eligibility requirements and that your application is complete. The SBA will also verify your business’s eligibility for the Paycheck Protection Program using information from the Dun & Bradstreet database. You can check your business’s D-U-N-S number here.
It usually takes the SBA 3-5 days to process a loan application and issue a decision. If your loan is approved, you will receive a Loan Authorization form from the lender with the loan amount, interest rate, maturity date, and other details.
Lender’s Review Process
The lender will review the application and supporting documentation submitted by the borrower. The purpose of the review is to determine whether the borrower meets the eligibility requirements for a PPP loan under the CARES Act and SBA’s regulations. Once the lender has made its credit decision, it will submit a loan authorization to SBA for approval.
SBA’s Loan Authorization
After receiving a complete loan application from the lender, SBA will authorize the lender to disburse the loan funds to the borrower.
