501(c)3's and For-Profits Alike: Get your SBA Paycheck Protection Grant Funding NOW
Does your nonprofit or for-profit business need financial help due to coronavirus?
If so, one the CARES act provides two primary federal government programs for small businesses: The Economic Injury Disaster Loan Program and the Paycheck Protection Program (PPP).
The lesser known $10,000 EIDL loan-to-grant program is MUCH simpler to apply for, has virtually no use-of-funds restrictions, and will likely be doled out to businesses faster. If you have already learned about (and hopefully applied for) the Easy EIDL, read on!
It's important to know that a business or individual may apply for both programs, so it may make sense to apply for the EIDL first!
We cover the EIDL in a different article posted here, and are gauging offering a "done-for-you service".
Below, we'll cover the PPP, with details on eligibility, important dates, and the application and documentation process.
What exactly is the Paycheck Protection Program?
The PPP allocates forgivable loans to smaller nonprofits and businesses to help you fund eight weeks of payroll, rent or mortgage interest, hire, and utilities. PPP is a small business relief program created under the Coronavirus Assist, Reduction, and Economic Safety (CARES) legislation recently passed by Congress and signed by President Trump.
It incentivizes companies to retain employees on payroll.
What can organizations use PPP resources 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 (incurred prior to February 15, 2020)
- Rent (under leases commenced pre-February 15, 2020)
- Utilities (if service began prior to February 15, 2020)
Note that independent contractors - even those essential to your business or nonprofit's core operations - are not covered by your entity. You must exclude their payments when calculating payroll costs (though it’s important to note, they can and should apply for themselves, and use those funds to offset your reductions in contract work, as appropriate!).
With only a part of the $350 Billion allocated by Congress for this program, funding is expected to be exhausted - so apply early.
Also, with the crush of applications being submitted, it will take time to process and disburse the funds, so wait times are expected to grow until they peak - likely by the beginning of May, 2020 (the program ends June 30).
In short, PPP forgivable loans are not expected to serve everyone in need; they are first come, first served; and only one loan per customer.
What is the PPP loan limit?
The program is designed to cover 2.5 1 month worth of the entity’s payroll, plus rent and utilities.
The steps to comply with the payroll formula laid out by the Small Business Administration are as follows:
- Find your average payroll from the previous year
- Calculate eight weeks’ worth of the average payroll
- Multiply by 2.5.
The loan limit is $10 Million per company or nonprofit; however, the rules are evolving by the day, so limits may change..
Bank loan information and forgiveness
A PPP loan has a repayment schedule of two years, as well as a fixed interest of 1%; with no personal guarantees.
Once you obtain a PPP bank loan, the loan obligations are deferred for 6 months, despite the fact that interest will accrue during this time period. However…
…if you keep the employees and avoid cutting pay rates, SBA will forgive some or all the total amount of the loan—depending on what you apply it for.
Specifically, the SBA will forgive the part of the loan that includes the first eight weeks of payroll, mortgage interest, rent, and utility expenses. The SBA will not likely forgive any part of the loan that you employ for other costs.
In case you are struggling to retain or rehire all of your workers, or if you reduced wages, the loan forgiveness amount is adjusted accordingly.
According to the Treasury, the loan forgiveness will decrease if:
- You reduce your full time employee (FTE) headcount (taking both full-time and part time staff into account).
- You reduce earnings and salary by more than 25% for any worker who earned less than $100,000 annualized, in 2019.
If you do, or already did, cut salaries and/or headcount contrary to the above conditions between February 15, 2020 – April 26, 2020, you have until June 30, 2020 to bring those employees back and restore pay rates,to get back in SBA good graces - and earn loan forgiveness.
Companies must allocate 75% of the borrowed loan amount toward payroll. Only 25% may be expended for mortgage interest, rent, and/or utilities.
Applying for loan forgiveness
Once the PPP loan is funded, maintain detailed records so that you can easily obtain forgiveness! The two best ways to do this are:
- Open a separate bank account to expend those funds
- Create bookkeeping categories of eligible expenses
- Monitor that those expenses comport with the 75/25 ratio
You may request loan forgiveness by sending a request to your lender after the eight-week period following the funding of the loan.
You will need to provide:
- The amount of full-time payroll and related costs
- Eligible mortgage interest, rent, and utility payments
Your lender has 60 days to grant or deny your application for loan forgiveness.
Who is able to apply?
All small enterprises with 500 or fewer workers can obtain a PPP loan. This includes:
- Self-employed workers
- Impartial contractors
- Sole proprietorships
- Veterans organizations
- Tribal organizations
IMPORTANT NOTE: Nonprofits, contractors and companies alike are prohibited from loan forgiveness under the PPP loan program for any employee who is collecting unemployment benefits!! The purpose of the program is to maintain staff on payroll.
What are the effective dates of the PPP program?
Small enterprises and exclusive proprietorships can begin applying on April 3, 2020. Sole proprietors and self-employed/contractors can apply beginning Apr 10, 2020.
The program is open through June 30, 2020.
Overview of the PPP loan application process
Applying for a new loan can be daunting, particularly one that is newly established. The content below covers the application process.
Where do I apply?
Applications for a PPP loan through any:
- Existing SBA 7(a) lender
- Federally insured depository institution (e.g., bank)
- Federally insured credit union
- Participating Farm Credit System institution
- Regulated lender that has been approved and is enrolled in the program
We HIGHLY recommend using a bank with whom you have an existing relationship, as banks are flooded with these and other CARES-related applications and information requests!
If you’re unsure whether a lender is participating in this payroll protection program, you can consult the To look up any lender, go to the website of the Small Business Administration.
The PPP Application Form
All 20% owners must participate in the application process. The application form will require basic business information such as:
- Type of business you operate (e.g., Corporation, nonprofit corporation, self-employed, etc.)
- Business legal name and DBA (if applicable)
- Taxpayer ID Number (a.k.a. EIN or Employer ID number)
- Business address, phone number, and email
The next section of the form involves payroll and loan details:
- Average monthly payroll
- Rent/mortage interest amount, and utilities costs
- Total loan amount (average monthly payroll X 2.5)
- Number of positions affected
- Loan purpose (e.g., payroll, rent, etc.)
There are also a series of Yes/No questions on the form, which determine eligiblility for the PPP loan.
If your organization applied for the other primary type of “coronavirus relief” loan (the SBA Economic Injury Disaster Loan) between January 31, 2020 – April 3, 2020, you will need to attach documentation to the application.
What documentation is required?
The primary documentation consists of payroll data, and other business records that any business should have on hand via bookkeeping software or other records.
Here is a checklist of documentation resources you will need for the PPP loan application::=
- IRS Form 941 for Q1 through Q4 of 2019
- Amounts included in the 2019 Forms 941 related to payroll reports from 2019 and Q1 2020 (if available) with breakouts per employee
- The following payroll costs are EXCLUDED:
- FICA tax (Social Security and Medicare taxes)
- Any worker compensation amount exceeding $100,000 per year
- Workers who reside outside the U.S.
Paycheck Protection Program resources
Use the following resources to help you navigate the ins and outs of the application process:
- Paycheck Protection Program Application Form
- Paycheck Protection Program (PPP) Information Sheet: Borrowers
- Small Business Administration Final Rule
- Find Eligible Lenders (SBA)
- Paycheck Protection Program Loans: FAQs (Treasury)
PPP too complex? Try the SBA Coronavirus loan alternative; THE EIDL
Companies unable or unwilling to slog through the more complex PPP application have another option: SBA Economic Injury Disaster Loans (EIDL).
Economic Injury Disaster Loans, in the maximum amount of $10,000 are available for businesses impacted by a declared disaster - this includes the SARS2-COV “Coronavirus” pandemic.
These loans carry an interest rate of 3.75% for small businesses and 2.75% for nonprofits. And, they come with a long-term repayment plan of up to 30 years.
That’s right - nonprofits and for-profits alike can apply for this COVID-19 Economic Injury Disaster Loan, which does not have to be repaid.
The EIDL may be used to cover more general business expenses, with no compliance challenges (such as the 75/25 ratio of payroll to mortgage interest/rent/utilities such as:
- Employee salary/wages
- Accounts Payable
- Other expenses as assessed by nonprofit/company management
IMPORTANT NOTE: You may apply for BOTH the Economic Injury Disaster Loan AND the Paycheck Protection Program, provided you disclose it!