PPP FAQs - Loan Eligibility and Application Requirements

A provision of the CARES Act, the Paycheck Protection Program (PPP) is a payroll assistance option that provides small businesses with a forgivable SBA-backed loan to cover 8 weeks of payroll and some operating expenses during the COVID-19 pandemic.

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Who can apply for a PPP Loan?

Most small businesses and certain non-profits with fewer than 500 employees, as well as self-employed individuals, are eligible for a PPP Loan if they were impacted by the COVID-19 pandemic from February 15 - June 30, 2020.

PPP Loan Eligibility Requirements:

  • In operation on February 15, 2020; and
  • Current economic uncertainty makes the loan necessary to support your ongoing operations; and
  • Small business with fewer than 500 employees; or
  • Certain franchises and NAIS Code 72 entities with fewer than 500 employees at each location; or
  • 501(c)(3) nonprofit, 501(c)19 veterans organization, or Tribal business with fewer than 500 employees; or
  • Self-employed individual (e.g., sole proprietor and independent contractor)

Not sure if you qualify as a small business or non-profit? Use the SBA’s Size Standard Tool to check your eligibility.

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Is the PPP Loan only for payroll costs?

No, PPP Loans may also be used for mortgage interest or rent, and utilities that were in place before February 15, 2020. For PPP Loan forgiveness, at least 75% of the loan must be used for qualified payroll costs.

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How much can I borrow?

You can borrow 2.5x your average monthly payroll costs for 8 weeks (including benefits). The total loan amount is capped at $10 million.

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When can I apply for a PPP Loan?

  • Friday, April 3: Small businesses and sole proprietorships can apply
  • Friday, April 10: Independent contractors and self-employed individuals can apply

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How do I apply for a PPP Loan?

You can apply for a PPP Loan through any existing SBA lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. Consult with your local lender to see if they are or will be participating in the program.

Due to high demand, lenders may prioritize applications for existing customers. We've created a list of Colorado and national PPP Loan lenders that may be able to assist non-customers.

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What do I need to certify for a PPP Loan?

As part of your application, you need to certify in good faith that:

  • Current economic uncertainty makes the loan necessary to support your ongoing operations.
  • The funds will be used to retain workers and maintain payroll or to make mortgage, lease, and utility payments.
  • You have not and will not receive another loan under this program.
  • You will provide to the lender documentation that verifies the number of full-time equivalent employees on payroll and the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the 8 weeks after receiving the loan funds.
  • Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.
  • All the information you provided in your application and in all supporting documents and forms is true and accurate. Knowingly making a false statement to get a loan under this program is punishable by law.
  • You acknowledge that the lender will calculate the eligible loan amount using the tax documents you submitted. You affirm that the tax documents are identical to those you submitted to the IRS. And you also understand, acknowledge, and agree that the lender can share the tax information with the SBA’s authorized representatives, including authorized representatives of the SBA Office of Inspector General, for the purpose of compliance with SBA Loan Program Requirements and all SBA reviews.

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How do I calculate my PPP Loan amount?

In general, PPP Loan amounts are calculated using your average eligible payroll costs for 2019 or from the previous 12 months, plus 25% of that amount for certain operating expenses. Eligible payroll costs are capped at $100,000 annualized per employee.

On April 8, the SBA provided additional guidance for seasonal and newer employers regarding alternate time periods they may use to determine average payroll costs, which is based on when they were open for business:

  • February 15 or March 1, 2019 through June 30, 2019; or
  • January 1, 2020 through February 29, 2020

If you're self-employed, your loan amount is based on your 2019 net profit as recorded on Form 1040 Schedule C, Line 31 (SBA is pending guidance for self-employed individuals who were not in operation in 2019).

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What counts as eligible payroll costs for the PPP Loan amount basis?

  • Compensation (salary, wages, commissions, or tips); capped at $100,000 on an annualized basis for each employee
  • Employee benefits, including vacation, parental, family, medical, or sick leave
  • Allowance for separation or dismissal
  • Payments required for the provisions of group health care benefits, including insurance premiums
  • Payment of any retirement benefit
  • State and local taxes assessed on compensation
  • For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee

Note: Do not include payments made to independent contractors or sole proprietors when calculating average payroll costs.

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What payroll costs are not eligible for the PPP Loan amount basis and forgiveness?

The following payroll costs are not covered by the PPP Loan:

  • Employee/owner compensation over $100,000
  • Taxes imposed or withheld under chapters 21, 22, and 24 of the IRS code
  • Compensation of employees whose principal primary residence is outside the US
  • Qualified sick and family leave for which a credit is allowed under the Emergency Family Paid Leave Expansion Act and Emergency Paid Sick Leave Act of the Families First Coronavirus Response Act (FFCRA)

For more information, go to PPP Loan Forgiveness FAQs >>

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I own a startup and have not yet paid myself on a regular basis. Should I still apply for a PPP Loan?

The Paycheck Protection Program is geared toward keeping employees paid and/or putting employees back on payroll who were laid off due to the economic impact of the Coronavirus pandemic. Under the PPP portion of the CARES Act, there is no provision for supplementing an owner’s investment. 

However, there is a provision under the SBA Economic Injury Disaster Loan (EIDL) program that might apply to your startup business. Like the PPP Loan, this is part of the $3.5B small business recovery program under the CARES Act. These loans provide immediate emergency assistance to small businesses impacted by COVID-19. EIDL Emergency Advance funds are provided within a few days of application for amounts up to $10,000, which does not have to be repaid. The EIDL program also includes long-term loans up to $2 million at an interest rate of 3.75% with a repayment period up to 30 years depending on the specific loan. 

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How much of my PPP Loan will be forgiven?

Up to 100% of the PPP Loan is forgivable if employee and compensation levels are maintained; decreases in full-time headcount, salaries or wages will reduce the forgiveness amount. You may also owe money when your loan is due if you use it for anything other than payroll costs, mortgage interest, rent, and utilities payments during the 8 weeks after receiving the loan funds. And if the loan amount is more than allowable expenses, that portion will not be forgiven.

At least 75% of the forgiven loan amount must have been used for payroll. The loan forgiveness amount is proportionate to the number of employees and wage amounts during the covered 8-week period compared to the same time the previous year (or alternate time period for seasonal and new employers). The covered 8-week period begins on the date that the borrower receives the first disbursement from the lender.

PPP Loan Forgiveness Calculation Basis:

  • Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
  • Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee who made less than $100,000 annualized in 2019.
  • Rehiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.

For more information, go to PPP Loan Forgiveness FAQs >>

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How do I request PPP Loan forgiveness?

You can request loan forgiveness from your lender and will need to provide documentation to verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. You must certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments. The lender must make a decision on the forgiveness within 60 days.

For more information, go to PPP Loan Forgiveness FAQs >>

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What are the terms of the PPP Loan amount that is not forgiven?

The PPP Loan has a fixed interest rate of 1% and is due in 2 years. All payments are deferred for 6 months, however, interest will accrue over that period. There are no prepayment penalties or fees.

For more information, go to PPP Loan Forgiveness FAQs >>

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Do I need to take any action if I filed a PPP Loan application based on the PPP Interim Final Rules published on April 2, 2020?

No. Per the US Treasury, "Borrowers and lenders may rely on the laws, rules, and guidance available at the time of the relevant application. However, borrowers whose previously submitted loan applications have not yet been processed may revise their applications based on clarifications reflected in these FAQs."

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Can ASAP Accounting & Payroll assist with my PPP Loan application?

If you are a current ASAP Accounting & Payroll client, we can help provide payroll reports and documentation for your PPP Loan application. If you authorize us as your loan agent with your lender, we can provide these services at no charge to you as they are paid by the lender. Please complete this form so we can add you to our processing queue. You may also use this form to indicate if you want to use ASAP as your loan agent.

Please Note: We are only offering Loan Agent Services to active clients of ASAP Accounting & Payroll, Inc. at this time.

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PPP Loan Resources

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Disclaimer: This information is provided as a self-help tool and does not constitute legal or financial advice. Laws, regulations and lending products are changing daily and decisions as to whether or how to use this information and/or what actions to take in response to the COVID19 Pandemic are solely those of the employer. The providers of this information disclaim any and all responsibility and liability for its accuracy, completeness or fitness for your particular business purposes.

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