SBA Payment Protection Program 101: How to Apply and What You Need to Know


The mission statement of the SBA (Small Business Administration) is to help Americans start businesses from the ground up and help them grow. They were founded in 1953 to promote free competitive enterprise. They help American business owners by providing:

Table of Contents

  • Business loans
  • Entrepreneurial development via free business counseling
  • Federal government contracting
  • Free education on how to start a business
  • Financial support in the face of a crisis

In the face of the Coronavirus pandemic the CARES ACT was created on Friday, March 27th, 2020. The act has the aim of utilizing $376 billion to help American small business owners and workers with financial aid.

Furthermore, the PPP (Paycheck Protection Program) was created to incentivize small business owners to retain employees. The loan program will not ask for loans back with the condition that for 8 weeks no employees are fired. $349 billion is set aside for these forgivable loans. In this article, we will try break down the SBA PPP program and answer any questions you may have.

What is the Paycheck Protection Program (PPP)?

The PPP was created as part of the CARES Act to help business owners keep employees during the brunt of the Covid-19 pandemic. The target date for the program is June 30th, 2020. The program functions on a first come first serve basis. Therefore, borrowers should not wait to take advantage of the program but act now.

Here are the basic details of the PPP:

  • Only business with fewer than 500 employees can apply
  • Loan payment deferral is 6 months
  • Interest rate is fixed at 1%
  • Loan due date is 2 years
  • No collateral is required to apply
  • Forgiveness is reduced when employee count decreases

What Does the Paycheck Protection Program Loan Cover?

The PPP covers 4 specific areas of business operations, which includes:

  • Payroll costs and employee benefits
  • Rent agreements that were drawn up before February 15 of 2020
  • Utilities where usage began before February 15th of 2020
  • Mortgage interests incurred before February 15th of 2020

You need to understand the specific areas covered by the loans so you are not in violation of the agreement.

Who Can Apply to the Paycheck Protection Program Loan?

The program was designed to help overcome the Covid-19 pandemic with small businesses in mind. Therefore, it’s not a free-for-all where any business can apply and get aid. To meet the criteria for a small business you must have fewer than 500 employees. If a business has more than one location, then there must be fewer than 500 employees at each location.

The type of people that can apply include self-employed persons, independent contractors, sole proprietors, veteran organizations, and tax-exempt nonprofit organizations.

The businesses that are not eligible include:

  • Non-profit businesses
  • Financial businesses that execute activities such as lending
  • Passive businesses
  • Pyramid sale distribution plans
  • Life insurance companies
  • Businesses located overseas
  • Illegal activity businesses
  • Businesses where the number of members is limited for reasons other than capacity
  • Loan packagers
  • Businesses with an associate that’s in legal trouble

Where to apply for a Paycheck Protection Program Loan?

You can apply for the PPP at a variety of financial institutions. Use the search engine of the official SBA website to find local financial institutions where you can apply for the PPP. You can enter your zip code to find local places and use the map of the US to find out where you have to go.

Want a list of places for each state? Then this link is a good resource that you can use to quickly find the options in your state. The list of financial institutions is sorted in the alphabetical order of the states they are found in.

The financial institutions that have approved the highest number of cases include U.S. Bank National Association, The Huntington National Bank, Wells Fargo, and TD Bank.

How to Apply for a Paycheck Protection Program Loan?

You can apply for the PPP by going to this link and downloading the Paycheck Protection Program Borrower Application Form. It’s in PDF format and should take just a few moments to download on the average internet connection. 

The form is 4 pages long and should take no more than 10-15 minutes to complete – it depends if you have your information organized. You’ll need to fill out information such as your business details, the purpose of the loan, the monthly average payroll, number of employees, and the location of your business.

You’ll need a bunch of documents to complete the form accurately. This includes bankroll information and business detail documents. However, you do not need to send off documents with the form. Simply complete the PDF form and send it off for review. You will be notified if further submission of forms is required to complete the application process.

How To Calculate for the Paycheck Protection Program Loan Value

Want to find out how much money you’re eligible to receive under the PPP? Firstly, the loan has a cap of $10 million regardless of any other factors. This ensures that there is enough money to go around for most small businesses that apply for the PPP.

The loan maximum amount is the value of 2 months’ worth of average payroll from last year and an additional 25%. New and seasonal businesses will use other data to arrive at the figure. The annual employee cap under this calculation is capped at $100,000. 

Payroll costs can include wages, salaries, severance payments, leave payments, compensation-related taxes, and retirement benefits.

Want to calculate the maximum loan amount yourself? Use the treasury provided formula that allows for a straightforward step by step calculation.

What is the Paycheck Protection Program Loan Forgiveness Policy?

The loan forgiveness policy is put in place to help those businesses that will be under the most financial stress. The amount of money you’re forgiven refers to the amount you don’t have to pay back. Meet the criteria for the policy and you don’t have to pay back a percentage, or the entire sum of the loan amount.

Here are a few things that determine how much you have to pay back:

  • The forgiveness amount decreases when you reduce the number of employees from your business. The amount that’s decreased is in proportion to the percentage of people that were released from employment.
  • Employee pay reduction also decreases the amount of money you don’t have to pay back.

You can apply for forgiveness after the 8 week period is up from the date of receiving the money. The lender has to respond to your forgiveness application within 60 days by law.

To increase your chances of qualifying for forgiveness you need to keep accurate and complete documents. This includes the number of employees on payroll and the amount of money they have received. Furthermore, documentation regarding payroll tax fillings, retirement and health insurance contributions, unemployment insurance filings, and rent/utility payments are also favorable.

If you do not qualify for the forgiveness then you can reapply with further documentation to boost your case. Otherwise, you’ll need to pay off the balance over a period of 2 years with interest set at 1%. You can also pay off the balance early without additional fees.

What Certifications are Required for the Paycheck Protection Program Application?

When making the application for a PPP loan you need to certify that:

  • Your business was already live on February 15th of 2020 and had employees that were on the payroll.
  • The PPP loan is required to support the business due to economic uncertainty.
  • Money received from the PPP loan will be used for keeping employees on payroll and paying them. Also, funds can be used for utility, lease, and mortgage interest payments. If funds are not used for these reasons, then the Federal Government can prosecute the business on charges of fraud.
  • Documentation about the payment of employee payroll, mortgages, utility bills, and other permitted expenditures will be proved over the 8 week period.
  • The applicant will not seek another loan under the PPP.
  • The applicant must certify that all information provided is accurate and true. 

You can review the official information provided by the federal government in Part T of the following document.

How Does Applying to the Paycheck Protection Program Affect Credit Scores?

The purpose of the PPP is to help businesses in a time of need. Therefore, credit scores will not be affected if a business takes advantage of the program. However, it does depend on if you pay the loan back.

Credit score companies will not look too positively at the failure to pay back a loan. It doesn’t provide confidence in the ability to repay loans in general. Payback the PPP loan and you’ll stand a higher chance of not having your credit score affected.


The PPP program is part of a historic stimulus bill that can help small businesses avoid going bankrupt in uncertain economic times. The quarantine measures from Covid-19 have crippled the income of a lot of businesses around the United States.

After reading this article you should have a better idea if you’re eligible to receive a PPP loan and how much you might get. Remember, that the loan program is on a first come first serve basis. So don’t wait for too long before filling out the application form for financial help that could save your business.

Businesses Not Eligible For SBA PPP Loan
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