The CARES Act created the Paycheck Protection Program (“PPP”), authorizing up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis; on April 23rd, Congress approved an additional $320 billion in PPP financing

FAQ Contents:

Terms & Eligibility

Payroll Calculation

Application Process

Forgiveness and Tracking

Terms & Eligibility

  1. How much can I borrow

A: You can borrow up to 2.5x average monthly payroll (see “Payroll Calculation”), below)

  1. What are the terms

A: Loan amounts not forgiven (see “Forgiveness”, below) will be charged 1% interest with a 2-year final maturity.  Payments are deferred for the initial 6 months

  1. Who can apply

A: Any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by coronavirus/COVID-19.  

Businesses in certain industries may have more than 500 employees if they meet the SBA’s size standards for those industries.  Small businesses in the hospitality and food industry with more than one location could also be eligible at the store and location level if the store employs less than 500 workers. This means each store location could be eligible.

  1. Do I need to look for other funding, or provide a personal guarantee or collateral

A: Unlike other SBA products, borrowers do not need to try to obtain credit elsewhere before pursuing this loan.  There is also no requirement to provide collateral or a personal guarantee

  1. Can I apply to the PPP if I have an existing SBA loan

A: Yes.  Unlike other SBA loans, the PPP is based on payroll spending, rather than on collateral or credit quality.

If you have an existing SBA loan, be sure to check with your lender for inclusion under the Debt Relief program, under which the SBA will cover interest, principal payments and fees on new and existing 7(A) loans for six months

  1. Can I apply to the PPP and other programs

A: Yes, you can apply to multiple SBA programs - as well as city or state programs, grants, etc. for which you are eligible.  Applicants are advised to be aware of the terms and conditions of all programs to which they apply

If applying to both the SBA’s EIDL and PPP program, please note that applicants will be asked to demonstrate different use of funds for each loan (for example, both should not be requested to meet the same payroll).

Payroll Calculation

  1. What counts as payroll

A: Payroll costs consist of... salary, commissions, cash tips or the equivalent, taxes and benefits.

Benefits include payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement.

  1. What if I don’t have employees

A: Owner-operators, independent contractors and sole proprietors can reflect Schedule C business income 

  1. Does partnership income count as salary

A: Only Schedule C Business income may be included; income reflected on a partnership K-1 does not qualify 

Application Process

  1. When can I apply

A: The Paycheck Protection Program will be available through June 30, 2020.

  1. How do I apply

A: You can apply through any existing SBA 7(a) lender, which includes banks, credit unions and Community Development Financial Institutions (CDFIs).  Check with your bank or lender for application details, or use the SBA’s find a lender site

  1. My bank isn’t accepting applications

A: Not all lenders are accepting applications and those that are may impose restrictions.  We advise clients to check with your bank or banks first.  Additionally,  local or community banks may be accepting applications.  

The SBA’s Find a Lender provides a list of other organizations accepting applications in your area (restrictions may apply).

Online lenders and platforms are also accepting or facilitating PPP applications.  Refer to the Score website for additional information and listing of online alternatives

  1. I had already submitted my application prior to the suspension

A: Check with your lender.  We expect most lenders will begin submitting completed but not-yet approved applications, but applicants should ensure this is the case and ascertain whether any additional action is required to maintain application status

  1. Will funding run out again

A: Congress appropriated a finite amount ($320B) for PPP spending.  If this is exhausted, applications will cease once again.  We recommend that would-be borrowers apply as soon as practicable

Forgiveness and Tracking

  1. Should I apply for or accept a PPP

A: With an uncertain future for many NYC-area businesses—particularly those in retail, food service, wellness, and other customer-facing businesses—deciding to accept the loan requires a thorough look at your business forecasts and the PPP loan terms.  However, even recipients who may not be able to spend the full amounts as planned in the given period and thus may not be able to have the full amount forgiven may wish to consider the PPP a low-cost form of financing.  For more information, see “PPP Issues to Consider”. Click Here

  1. Do I have to use the PPP for payroll costs only

A: Funds can be used for payroll costs, as well as other operating expenses such as interest on mortgages, rent, and utilities

  1. How is forgiveness calculated

A: The SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.  (At least 75% of the forgiven amount must have been used for payroll).  

  1. Is forgiveness automatic

Applicants will need to apply to the lender servicing their PPP loan, and will be required to provide spending, payroll and headcount documentation.  We recommend that borrowers a) segregate PPP funds and disbursements and b) maintain careful records.  For more information, see Advice to PPP Recipients on the Score website.

  1. What if I can’t afford to keep my staff on payroll for the next eight weeks

A: 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

  1. How does an EIDL advance affect PPP forgiveness

A: Proceeds from any advance up to US$10,000 on the EIDL loan will be deducted from the loan forgiveness amount on the PPP loan.