What Are the Qualifications for a PPP Loan?
The Paycheck Protection Program (PPP) offers low-interest loans to small businesses, nonprofit organizations, veterans groups, and tribal businesses.
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Basic Qualifications
Any business with 500 or fewer employees is eligible for the Paycheck Protection Program. The business may be a sole proprietorship, LLC, partnership, or corporation. You must also have been in business on February 15, 2020, and have paid salaries and payroll taxes.
You must be a small business, as defined by the SBA
To qualify for a PPP loan, you must:
-Be a for-profit business, nonprofit organization, veterans organization, or Tribal business concern
-Have fewer than 500 employees (or fewer than 300 if you are a sole proprietor, self-employed individual, or independent contractor)
-Operate primarily within the United States
-Have used or will use the loan proceeds to cover payroll and other qualifying expenses
You must have been in operation for at least two years
To qualify for a PPP loan , you must have been in operation for at least two years as of the date you submit your application. In addition, your business must fall into one of the following categories:
-Sole proprietorships
-Independent contractors
-Self-employed individuals
-Any business with 500 or fewer employees that meets the SBA’s size standards
If you’re not sure if your business meets the SBA’s size standards, you can use this tool to find out.
Eligibility
You may be eligible for a Paycheck Protection Program (PPP) loan if you are a small business owner, self-employed, or an independent contractor and meet the following criteria:
You must have suffered financial hardship as a result of the pandemic
In order to be eligible for a PPP loan, you must have suffered financial hardship as a result of the pandemic. This can be demonstrated by showing that your business has experienced a decrease in revenue, or that you have had to lay off or furlough employees. You must also be able to show that you need the loan in order to maintain your business operations or pay your employees.
You must have used or plan to use the loan for qualifying expenses
To qualify for loan forgiveness, you must have used or plan to use the loan for qualifying expenses, which include:
-Payroll costs
-Rent
-Mortgage interest
-Utilities
You must also have:
-Used at least 60% of the loan for payroll costs
-Not laid off or reduced the number of employees or their pay by more than 25% compared to before February 15, 2020
-Not closed or reduce the number of business locations
Documentation
You will need to complete and submit a PPP Loan Application and Promissory Note. In addition, you will need to provide supporting documentation to prove that your business has been adversely affected by the COVID-19 pandemic. This documentation can include tax forms, payroll reports, financial statements, or other similar documentation.
You will need to provide documentation of your financial hardship
If you are applying for a Paycheck Protection Program (PPP) loan, you will need to provide documentation of your financial hardship. According to the U.S. Small Business Administration (SBA), you must be able to show that your business has been “adversely affected by covid-19.”
To do this, you will need to provide your lender with:
-Your payroll records for the past 12 months
-Proof of your business’s revenue for the past 12 months
-Your most recent quarterly or year-end financial statement
-A signed personal guarantee from each owner of 20% or more of the business
You will need to provide documentation of your qualifying expenses
To qualify for a PPP loan, you will need to provide documentation of your qualifying expenses, which include payroll costs, mortgage interest, rent, and utility expenses. You will also need to have a plan for how you will use the loan proceeds.
If you are self-employed, you will need to provide documentation of your income and expenses. This can include tax returns, profit and loss statements, bank statements, and other financial statements.
Other Considerations
Aside from the basic qualifications that all businesses must meet in order to qualify for a PPP loan, there are a few other considerations that businesses should be aware of. In this section, we’ll go over a few of those other qualifications and how they can impact your business’s chances of qualifying for a PPP loan.
You must be current on your existing SBA loans
In order to qualify for a Paycheck Protection Program (PPP) loan, you must be current on your existing Small Business Administration (SBA) loans. This means that you cannot have any delinquent SBA loans as of the date of the PPP loan application. If you are not current on your SBA loans, you will not be eligible for a PPP loan.
You may not have received a PPP loan in the past
The Paycheck Protection Program (PPP) is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.
In order to be eligible for a PPP loan, you must:
– Be a small business with 500 or fewer employees
– OR meet the SBA’s size standards for your industry
– Be a business, nonprofit organization, veterans organization, or tribal business concern
– Have used or will use the loan proceeds to cover payroll and certain other expenses
-Demonstrate that you have been affected by the coronavirus pandemic
