Paycheck Protection Program Explained
Overview
A Paycheck Protection Program loan offers relief to small businesses impacted
by COVID-19 by providing emergency capital for the purpose of retaining employees.
Most importantly, borrowers are eligible for loan forgiveness equivalent to the sum
of the loan proceeds expended on covered expenses during the eight-week period
after the loan is originated.
Am I eligible?
Small businesses actively operating on February 15th, 2020, and having fewer than 500
employees or meet SBA industry size standards, whichever is greater, are eligible to
apply. This includes sole proprietorships, independent contractors, and self-employed
individuals; 501(c)(3) non-profit organizations, 501(c)(19) veterans organizations,
and Tribal businesses (see sec. 31(b)(2)(C) of the Small Business Act) affected by
coronavirus/COVID-19. For eligibility purposes, Accommodation and Food Service
businesses (NAICS 72) are assessed on the number of employees per location basis.
How can I use it?
Loan proceeds can be used for any business operating expenses, however,
when used for defined purposes, the loan can be forgiven in whole or in part.
How much can I borrow?
For businesses that existed in 2019, the maximum loan amount is the lesser
of 2.5 times the business' average monthly payroll costs based on the previous
12-month period, or $10 million. Seasonal businesses should use the period
February 15th or March 1st to June 30th, 2019; new businesses should use
January 1st - February 29th, 2020.
How do I calculate my average
monthly payroll costs?
sum of
INCLUDED
payroll costs
sum of
EXCLUDED
payroll costs
PAYROLL
- = COSTS
INCLUDED
Gross salary, wages,
commissions or similar
compensation (e.g. tips);
Payments for paid time off
(e.g. vacation, parental,
family, medical, or sick
leave);
Payments required for the
provisions of retirement
and employee benefits
including insurance
premiums;
Payments of state or
local tax assessed on
the compensation of
employees; plus
Allowance for dismissal
or separation.
EXCLUDED
Compensation of an
individual employee
in excess of an annual
salary of $100,000;
Any compensation
of an employee whose
principal place of
residence is outside
of the United States;
Qualified sick and family
leave wages for which
a credit is allowed under
sections 7001 and
7003 of the Families
First Coronavirus
Response Act; and
Payroll taxes, railroad
retirement taxes, and
income taxes.