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April 8, 2020 4:05pm

GLI’s Guide to the Paycheck Protection Program

The CARES Act, the COVID-19 relief bill recently signed into law by President Trump, provides $350 billion of federally guaranteed loans to small businesses. The new program, known as the Paycheck Protection Program, was designed to help small businesses keep their employees on payroll throughout this crisis. The Paycheck Protection Program, or PPP, is in addition to the Economic Injury Disaster Loan Program, or EIDL (which has been expanded and is also available for small businesses in greater Louisville in both Indiana and Kentucky). 

While EIDL is administered directly by the U.S. Small Business Administration, individual lenders will administer PPP. The SBA is working to expand the number of eligible lenders to assist businesses in securing funds. Other related regulations and guidance are also expected very soon. In the meantime, learn more about the new program below to begin determining if it is the right fit for your business and needs. 

Applications for PPP will be open on April 3, 2020, for small businesses and sole proprietors and April 10, 2020, for independent contractors and self-employed individuals. A sample application is available here. Guidance from the US Department of the Treasury can be found here.

Please be aware the details of this new program are changing as additional guidance is released.


  • Small businesses with fewer than 500 employees (includes all employees) or that otherwise meets the SBA’s size standards. 
  • A 501(c)(3) with fewer than 500 employees
  • Sole proprietors, independent contractors, and self-employed individuals 
  • Tribal business concerns that meet the SBA size standard 
  • A 501(c)(19) Veterans Organizations that meet the SBA size standard
  • In addition, the SBA’s affiliation standards are waived for small businesses in the hotel
    and food services industries; franchises in the SBA’s Franchise Directory; and businesses that receive financial assistance from small business investment companies licensed by the SBA.

Businesses must have been in operation prior to February 15, 2020, and will be asked to certify that:

  • They need the loan due to current economic conditions related to the COVID-19 pandemic
  • They will use the loan to retain workers on their payroll and meet other necessary obligations such as leases and utility payments
  • They do not have outstanding applications for loans for similar purposes
  • They have not already received a loan for a similar purpose between February 15, 2020 and December 31, 2020.

No collateral will be required. Nor is a personal guarantee required. 

Available Funding

The maximum loan amount is up to two months of your average monthly payroll costs from the last year plus an additional 25 percent of that amount, not to exceed $10 million.

Payroll costs include:

  • Employee salaries, wages, and commissions
  • Tips
  • Compensation for vacation, parental, family, medical, or sick leave
  • Allowance for dismissal or separation
  • Group health care benefits, including insurance premiums
  • Retirement benefit
  • Assessed state and local taxes
  • For a sole proprietor or independent contractor: wages, commissions, income, or net
    earnings from self-employment, capped at $100,000 on an annualized basis for each

Payroll costs do NOT include:

  • Compensation of an individual employee in excess of an annual salary of $100,000 
  • Payroll taxes, railroad retirement taxes, and income taxes
  • Compensation of an employee whose principal place of residence is outside of the United States
  • Qualified sick leave wages for which a credit is allowed under section 7001 of the Families First Coronavirus Response Act (Public Law 116– 5 127); or qualified family leave wages for which a credit is allowed under section 7003 of the Families First Coronavirus Response Act

Payroll formulas are established for seasonal employers and businesses that did not start operating until 2020. Email GLI for more information.


Loans under the Paycheck Protection Program are at least partially forgivable under certain circumstances and depending on the amount borrowed. The amount forgiven cannot exceed the principal.

The forgivable portion of a loan is equal to the amount spent by the businesses in the eight weeks following the origination date on the following items:

  • Payroll costs (same definition as used to determine eligibility)
  • Rent or mortgage interest
  • Utility costs

The amount forgiven can be reduced IF within that same time period, the number of employees is reduced or if wages paid to employees are reduced by 25 percent. U.S. Treasury recently announced additional guidance on loan forgiveness for PPP:

You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.

You will also owe money if you do not maintain your staff and payroll.

  • Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time
    employee headcount.
  • Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and
    wages by more than 25% for any employee that made less than $100,000 annualized in
  • Re-Hiring: 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.” 

More details of PPP:

  • Interest rate of 1 percent for non-forgivable portion of the loan
  • Loan is due in two years
  • First payment deferred for six months
  • 100% guarantee by SBA
  • No collateral
  • No personal guarantees
  • No borrower or lender fees payable to SBA

How to apply

According to guidance from the SBA current as of April 1, 2020: “You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union,  and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program.”

A sample application is available here. FIND ELIGIBLE LENDERS HERE

More GLI resources for businesses