Paycheck Protection Program

April 3, 2020 - 7 minutes read

Updated 7/6/20

Note: The implementation of COVID-19 relief programs is a fluid situation with new details released daily. We strive to keep this information as up-to-date as possible and will highlight important changes you should be aware of.

Updates as of 7/6/20

The Paycheck Protection Program resumed accepting applications July 6, 2020, at 9:00 AM EDT in response to President signing the program’s extension legislation. The new deadline to apply for a Paycheck Protection Program loan is August 8, 2020.

The PPP Flexibility Act:

  • Extends the covered period from 8 weeks to 24 weeks
  • Extends the minimum loan term from 2 years to 5 years (for new loans)
  • Borrowers have 10 months from the last day of the covered period to apply for forgiveness
  • Defers the first payment due to the date that forgiveness amount is determined by lender
  • Extends the FTE rehiring deadline from June 30th to December 31st
  • Employers can reduce FTE requirement if they can document a reduction in business due to compliance with new health and safety requirements
  • Ratio of payroll to non-payroll expenses reduced from 75:25 to 60:40

Eligibility:

This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organizations or 501(c)(19) veterans organizations affected by coronavirus/COVID-19.

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.

Additional Updates: 

  • Borrowers CAN have both PPP + EIDL, but CANNOT use other federal money (i.e. EIDL) on the same expenses
  • Self-employed and contractors can apply for themselves
  • For more information, read the SBA’s interim rule and the Treasury’s fact sheet

Loan Amount:

The loan amount is equal to 2.5 times the average monthly payroll costs from the previous 12 months PLUS any outstanding EIDL loan amount for a maximum loan of $10,000,000.

The amount of “Payroll related costs” is defined as the sum of payments of any compensation with respect to employees that is a salary, wage, commission, tip, vacation, parental, family, medical leave, sick leave, allowance for dismissal or separation, group health care benefits, retirement benefits and state or local taxes. The PPP loan has a 1.00% fixed rate. Loan payments will be deferred for 6 months. Interest will accrue during the deferment period.

Forgiveness:

Only funds used during the first 8 weeks after the loan is closed can be forgiven. Other criteria include: 

  • At least 75% of the loan proceeds are used to cover payroll costs 
  • The remaining 25% (or less) must be used only on mortgage interest, rent, and utility costs that began before February 15th, 2020 AND
  • Employee and compensation levels from the previous 12 month average are maintained 

Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease. 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. 

Forgiven amounts will include any accrued interest. Any amounts not eligible for forgiveness will be subject to loan terms above.

Download the PPP Loan Forgiveness Application Here

What counts as payroll costs?

Payroll costs include:

  • Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee);
  • Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit;
  • State and local taxes assessed on compensation; and
  • 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 employee.

Does the PPP cover paid sick leave?

Yes, the PPP covers payroll costs, which include employee benefits such as costs for parental, family, medical, or sick leave. However, it is worth noting that the CARES Act expressly excludes qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act (FFCRA) (Public Law 116–127). Learn more about the FFCRA’s Paid Sick Leave Refundable Credit online.

How does PPP work with other programs?

  • Economic Injury Disaster Loan (EIDL): You can have both loans, but cannot overlap use of funds
  • EIDL Emergency Grant: Deduct any amount forgiven from your PPP loan from what may be forgiven from your EIDL advance
  • Unemployment: You may have employees on unemployment, and you may also be on unemployment and receive a PPP loan. However, you may not pay yourself or employees payroll while also receiving unemployment benefits. 
  • You may NOT receive tax credits from Families First Coronavirus Response Act on payroll costs forgiven through PPP
  • You may NOT use employee retention credits on payroll costs forgiven through PPP

How to Apply

Paycheck Protection Program loans are only available through your local SBA certified bank or credit union. If you already applied, check with your lender on the status. If you are starting a new application, follow these steps:

  1. Start by calling your existing bank or credit union to see if they’re participating.
  2. Use this online search tool to find a nearby lender eligible to issue a loan under the PPP.
  3. If you wish to begin preparing your application, you can download a copy of the PPP borrower application form to see the information that will be requested from you.
  4. You will need to provide your lender with payroll documentation.

The State of Michigan has launched MIPaycheckProtection.com as a comprehensive resource for both lenders and small business owners.

Want to discuss your funding options with a business consultant (at no cost to you)? Request a virtual appointment with the Michigan SBDC!