SBA Paycheck Protection Program Loans
When business is anything but usual
The deadline for the SBA Paycheck Protection Program was August 8, 2020. The SBA is no longer accepting new PPP Loan applications.
How an SBA PPP Loan works
Loan Amount: Loan amounts are up to 2.5x your average monthly payroll cost, for a maximum of $10 million.
Rates & Fees: 1% fixed interest rate, and no additional fees of any kind, including no origination fees or prepayment penalties.
Term Length: At least 5 years. For PPP loans made prior to June 5, 2020, the term length is 24 months.
Repayment: PPP loan payments are deferred until after you have applied for forgiveness and your forgiveness amount is approved by the SBA, but interest will continue to accrue during this time.
Understanding PPP Loan Forgiveness
You are eligible to apply for loan forgiveness 24 weeks after you received your PPP Loan funds. Please note, if you received a PPP loan prior to June 5, 2020, you may choose an 8-week covered period or opt for the 24-week extended covered period.
PPP Loans are eligible for forgiveness, including accrued interest
- PPP Loans are eligible for up to 100% forgiveness
- Only PPP Loan funds used for payroll costs, rent, covered utilities, and interest on a mortgage (no prepayments) are eligible for forgiveness
- At least 60% of total PPP Loan funds must be used for payroll costs (including benefits)
This is equal to the amount spent on allowable costs in the 8 or 24 weeks after:
- You received your PPP Loan funds or,
- The first day of your next payroll cycle
The forgivable amount may be reduced under the following circumstances:
- If you do not use the PPP Loan funds on allowable costs at the 60/40 ratio or,
- If you made reductions to employee salaries or full-time employee headcount and fail to restore salaries and headcount to previous levels by December 31, 2020.
There is 1 application for PPP Loans under $50K. There are 2 applications for PPP Loans over $50K, the EZ Application and the Full Forgiveness Application.
To qualify for the EZ Application, you must be able to certify to one of the following:
- You are a non-employer (self-employed) business, independent contractor or sole proprietorship
- You did not reduce annual salaries/hourly wages of employees by more than 25% and did not reduce staffing levels during the covered period
- You did not reduce annual salaries/hourly wages of employees by more than 25% and can demonstrate that you were unable to operate at normal business levels
For businesses with PPP Loans less $50K, you can find your Forgiveness Application form here and application instructions here. For businesses with PPP Loans over $50K, if you are eligible for the EZ Application, you can find the EZ Application form here and the application instructions here. If you are not eligible for the EZ Application, you can find the Full Forgiveness Application form here and the application instructions here.
Check out our detailed guide to learn more about PPP Loan forgiveness.
For answers to common PPP Loan Forgiveness questions, check out this FAQ guide from the SBA and Department of Treasury.
FAQs: SBA PPP Loans
Can I apply for a PPP Loan with OnDeck?
No, OnDeck is no longer accepting new Paycheck Protection Program loan applications. Please note, under the current extension of the program, the SBA will no longer approve any new PPP loans after August 8, 2020.
What is the rule the SBA released for non-employers?
Under the original rules for non-employers (including self-employed individuals, independent contractors or sole proprietors), the amount that could be claimed as owner compensation (payroll) was capped at 8 weeks of 2019 net profits, meaning a non-employer could not claim that 100% of their PPP loan was used for payroll.
Under the new rule, non-employers who choose the 8-week covered period will still have a forgiveness amount limited to 8 weeks of 2019 net profits in owner compensation; however, those that choose the 24-week covered period will be entitled forgiveness of up to 2.5 months of 2019 net profits. This is a significant and beneficial update for non-employers, because it allows 100% of a PPP loan to be forgiven and allows you to devote the full loan amount to owner compensation.
Does this loan require any collateral or personal guarantees?
Paycheck Protection Program loans are backed by a federal loan guarantee. There is no collateral or personal guarantee required.
What is the payment deferral period for PPP Loans?
PPP Loan payments are deferred until after you apply and have a decision for loan forgiveness from the SBA, but interest will continue to accrue during this time. If you do not apply for loan forgiveness, payments are deferred for 16 months after your PPP Loan funding date.
What counts as payroll costs? I work by myself and pay contractors. Do I still have payroll?
Payroll costs include compensation and employee benefits, such as health insurance, retirement benefits, parental and sick leave, and vacation. If you are a sole proprietor or independent contractor, payroll costs include compensation or net earnings from self-employment. Costs per employee are capped at $100,000 on an annualized basis. For more details on payroll costs, review this excellent guide from the U.S. Chamber of Commerce.
I need funds beyond just covering payroll expenses. Are there other financing options available to me?
Yes. You may be eligible for an OnDeck Business Loan. You can also visit our resource hub to learn more about other government assistance programs available for small businesses during COVID-19. You may be eligible for a loan or grant from your local or state government, or an SBA Economic Injury Disaster Loan (EIDL).
Can I get an OnDeck Business Loan in addition to a PPP Loan?
Yes. At OnDeck we understand that these loans can serve two different purposes, so we make it easy for you to apply for an OnDeck Loan in addition to your PPP Loan. Please note, OnDeck is no longer accepting new Paycheck Protection Program loan applications.
What is the PPP Loan Forgiveness process for my PPP Loan with OnDeck?
To ensure the best possible experience and prevent any duplicate work on your part, we are not yet accepting any forgiveness applications and will not be accepting applications until final forgiveness rules and guidance are released by the SBA. As soon as we start accepting applications, we will send you an email invitation when it is time for you to apply for forgiveness. Please do not submit any paper-based or scanned applications to OnDeck as they will not be accepted. The only way you will be able to successfully complete the forgiveness application with OnDeck will be through the online application link we will send you via email.
Looking for other financing options?
OnDeck offers Small Business Short Term Loans and Lines of Credit
Resources to help you navigate PPP
What is the Paycheck Protection Program?
What is the Paycheck Protection Program Flexibility Act?
How does Paycheck Protection Program Loan Forgiveness Work?
Recommended webinars with Gene Marks
Gene Marks is a small business financial expert. He runs a small business consulting firm and writes weekly as a columnist for The Washington Times, The Hill, The Philadelphia Inquirer, The Guardian, Forbes, and Entrepreneur.