In or starting a small business? Explore the Paycheck Protection Program starting 4/3/20, and other programs

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To help businesses survive the coronavirus economy, the government is providing support. If are in or run a small business adversely affected by the coronavirus directly or indirectly, explore the recent CARES Act Paycheck Protection Program (PPP) forgivable loan, Disaster Loan (& grant) Assistance, or Employee Retention Credit program. The PPP started 4/3/20 for small businesses, and 4/10/20 for sole proprietorships and independent contractors. These programs expects high application volume, and funds may run out quickly. For the PPP, almost all small businesses (500 employees or less) are eligible. Some companies over 500 employees are also eligible, for example those in hospitality and certain other industries and franchises, which allow 500 per location, rather than the overall company total, possibly with some exceptions.

These programs provide opportunities to retain jobs, help your business, and thereby help stabilize and stimulate the economy during this coronavirus period.

Payroll Protection Program:

This program creates a forgivable loans for small businesses, with only a few exceptions. You could receive up to the equivalent of 250% of your monthly “payroll costs,” (2 months plus an additional 25% for non-payroll costs such as rent and utilities), up to $10,000,000. Note that “payroll costs” for this program include certain compensation types, as well as health insurance and other costs (see links below for details).

Some banks will initially gather primarily or only the basic information required by the SBA application (see link below, which may be helpful as a sample application for part of the information your bank will require), and then banks may follow up with borrowers for any additional documentation. Below are some resources and tips that may help. At bottom, summary information for a separate program, SBA’s Disaster Loan Assistance (DLA), is also provided (up to $10k grant, plus up to $2m in loans). It is allowable to apply and receive funding from both the PPP and DLA programs.

Summaries of the PPP program, with similar but different levels of clarity:

Application form (note: Your bank will likely require their own similar form or on-line input/submission):

PPP program information (updated periodically by SBA):

The PPP requires that you use a SBA 7(a) approved lender. The link below shows the top-100 lenders, but NOTE that many approved lenders will only take applications if you are an existing business customer, and some will only take applications if you also have a lending relationship with that bank, so contact your company’s bank first.:

A few hints that may help during your PPP application process:

  • Contact your bank and/or bank website ASAP to find out where and when to apply. Sooner increases your chance of getting into the queue.
  • Some banks are already taking online applications, others are not ready (as of 4/3/20, 6 am PT). Monitor closely.
  • Application information and follow-up documentation may vary by bank, and may vary from the SBA’s application form above (which is really just a sample).
  • Start gathering data before you start the application, to compute the allowable “Payroll costs,” given that allowable items go beyond just compensation. The first set of links above (e.g. Treasury Dept. file) includes details on what can be included as payroll costs, it includes rent, health insurance, and more.
  • In order to complete the application, you may also need to know your legal tax classification, e.g. S Corp, C Corp, partnership, or Single Member Sole Proprietorship. NOTE: This may be different than your legal entity, which could be LLC or other. You should be able to find this on your business tax return.
  • It isn’t known whether or not you will be able to submit the basic information now and update it later if there is government clarification and guidance in the future, and whether or not that would affect your place in line. That may also vary by lender.
  • The phrasing of the language of the Treasury department summary document above seems (incorrectly) imply that contractors can be counted as employees. Section 2(h) of the final SBA PPP rules (–IFRN%20FINAL.pdf) and the Department Commerce Department document above make it clear that contractors are not to be counted as employees in the compensation or employee count numbers of small business applications.
  • The 25% on top of “payroll costs” is embedded in the “Multiply by 2.5” application form calculation, as an extra cost buffer (for rent, utilities, etc.), and does not require that you gather specific documentation of such costs for the application. Banks, however, may or may not require additional information.
  • Based on information gathered from an accounting firm, we’re told that compensation numbers can/should be based on “W2 Box 5 Medicare Wages and Tips,” which implies that bonuses can also be included, but comp is still subject to a $100k annual per-person cap. Non-W2 owners would use income numbers from tax returns, and tax return form documentation, if any, may vary by lender.
  • PPP loans will be forgiven if the requirements are followed, see the first set of links above for details. Requirements primarily involve spending the loan on the same types of costs outlined in what are allowable “payroll costs” and rent, utilities, as referenced above.
  • Loan payments will be deferred for six months.
  • The definition of “payroll costs” excludes paid-sick and paid-family leave payments made pursuant to the new Families First Coronavirus Response Act (FFCRA), since reimbursement for those leave payments will be provided through tax credits.
  • The Interim Final PPP rule references full-time employees, but seemingly in the context of validating that the same number of full-time equivalents are employed at the end of the 2-month period, as part of the loan forgiveness requirements. The document does not (nor do subsequent clarification documents as of 4/6/20) clarify how full-time is defined, and doesn’t specifically include or exclude part-time employees. We would prefer to see written guidance on this matter, however we phoned the SBA and were told that the application process does not distinguish between full- and part-time for purposes of the forgivable loan, and the the sample PPP application, simply asks for “Number of jobs.”
  • Update 4/16/20: SBA announced that the $350 billion PPP program funds were exhausted.
  • Update 4/23/20: House passed $484 billion in aid for small businesses, hospitals and testing, President says he will sign. $310 billion of these funds which will be allocated to expand the PPP.
  • Update 4/27/20: SBA resumed taking PPP applications, but the government is now capping the amount of the total loan processed by each bank at $60 billion, an effort to prevent any bank from grabbing an excessively large chunk of the total pool.
  • See the links above for additional updates.

The information above expands on a prior blogpost.

Employee Retention Credit program:

The Employee Retention Credit is a fully refundable tax credit for employers equal to 50 percent of qualified wages (including allocable qualified health plan expenses) that Eligible Employers pay their employees.

  • Applies to qualified wages paid after March 12, 2020, and before January 1, 2021.
  • The maximum amount of qualified wages taken into account with respect to each employee for all calendar quarters is $10,000, so that the maximum credit for an Eligible Employer for qualified wages paid to any employee is $5,000.
  • Can apply for this program or the PPP, not both.
  • Additional information:

Disaster Loan Assistance program:

This is a new program, separate from the Payroll Protection Program, but you can apply for both DLA and PPP, apparently with the caveat that the purposes need to be different, possibly such as economic harm vs. job retention:

  • $10,000 grant (not a loan) to be distributed within approximately 5 days to qualified entities impacted by the coronavirus.
  • There are apparently no requirements for the grant other than your business being in operation before 2/1/20.Within 2-3 weeks, an officer will contact you to discuss any non-forgivable (unlike PPP) borrowing needs, up to $2,000,000.
  • The Advisory Group called the SBA line below (they answered late at night!) and responded with “Yes, the grant seems too good to be true, but it is true.”
  • DLA is administered directly by the SBA (800-659-2955 or for questions).
  • DLA online application form:
  • Update 4/13/20: The $10k grant was changed to a maximum of $10k, based on $1,000 per employee.
  • Update 4/16/20: This program is not currently taking applications, and funds may be exhausted, but check periodically to see if the program is expanded, given that some lawmakers are seeking additional funding.

Please periodically check back to review this blog-post, as we may add additional information as it becomes available.

Update notes in addition to references above:

4/3/20: Clarification about not counting/allowing contractors as eligible jobs within small business applications.

4/6/20: Additional clarification about not counting contractors within small business applications. Loan payments deferrals. Paid-sick and paid-family leave payments exclusions. Question about full-time vs part-time employees, and possible clarification.

4/27/20: Employee Retention Credit link provided.

This article is for informational and educational purposes. Any hyperlinks to third party websites are not endorsements and outside content is believed to be reliable but has not been independently verified. Consult an objective financial advisor for guidance as appropriate.