Eligible Businesses

All businesses with 500 or fewer employees can apply. However, the company must have been in business with paid employees as of February 15, 2020. Nonprofits, self-employed individuals, and other independent contractors can also apply for a PPP loan. No personal guarantees or other types of loan security are required. 

How to Apply

Businesses apply for PPP through approved banks and credit unions. Approximately 1,800 lenders are currently allowed to issue 7(a) loans. To find out if your financial institution is approved, visit the SBA website’s list of lenders. 

Potential Loan Amounts

Applicants can request up to 2.5 times their payroll costs based on their previous year’s averages. However, they can’t borrow over $10 million dollars. Payroll costs include employee salaries and wages up to $100,000 per employee per year, as well as payroll taxes, severance payments, health insurance, group health insurance, and retirement plan contributions. 

7(a) Loan Repayments

Some businesses will be allowed to defer repayment of both principal and interest for up to a year, although the exact parameters of the deferment period will be determined by the bank. All lenders must wait at least 6 months before initiating the repayment process. Any remaining balance will have a maximum maturity of 10 years at an interest rate of 4% or less, with no penalty for prepayments. 

Loan Forgiveness 

To qualify for loan forgiveness, all loan proceeds must be used on eligible expenses. When submitting an application for loan forgiveness, recipients must provide supporting documentation that proves their eligibility and a specified certification. 

The Amount of the Forgiven Debt

The maximum amount of loan forgiveness will equal the sum of the employer’s payroll costs, rent, utilities, and interest on prior debt.

Taxation on Forgiven Debt? 

For businesses that receive a PPP loan, any debt that’s forgiven isn’t considered part of their income, which means it’s not federally taxed. If you have any questions, please don’t hesitate to contact your trusted Smolin professional. We’ll continue to provide essential updates and money-saving tips as we navigate these uncertain times.