What is the Paycheck Protection Program?

The Paycheck Protection Program (PPP) provides forgivable loans to small businesses to help cover up to 24 weeks of payroll costs, interest on mortgages, rent, and utilities. PPP is a small business relief measure established under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). It incentivizes businesses to retain employees on payroll.

What can employers use PPP funds for?

• Payroll costs for full-time and part-time employees
  • Salaries, wages, commissions, or tips ($100,000 max per employee—gross earnings)
  • Employee benefits (e.g., vacation, sick leave, health care benefits, retirement benefits)
  • State and local taxes
• Interest on mortgages (for loans incurred before February 15, 2020)
• Rent (under lease agreements pre-February 15, 2020)
• Utilities (if service began before February 15, 2020)

Loan Forgiveness?

A payroll-protection loan has a repayment plan of five years and a fixed interest rate of 1%. You do not need collateral to apply. 

If you receive a PPP loan, your loan payments are deferred until you receive loan forgiveness from the SBA (or 10 months after the covered period if you don’t apply for forgiveness), although interest will accrue during this time. However…

…if you retain your employees and maintain salary levels, the Small Business Administration (SBA) will forgive part or all of the principal amount of the loan (plus accrued interest)—depending on what you use it for. 

If you are not able to retain or rehire all of your employees, or if you lower wages, the loan forgiveness amount may decrease. According to the Treasury, your loan forgiveness will decrease if you:

1. Decrease your full-time equivalent (FTE) employee headcount (which takes both full-time and part-time employees into account)
2. Decrease salaries and wages by more than 25% for any employee who made less than $100,000 annualized in 2019
3. Do not restore your employment and salary levels by December 31, 2020