Gehman Accounting Blog

Your Guide to the Paycheck Protection Program

Austin Weaver - Apr 9, 2020 2:32:39 PM

July 6 - Update on the PPP

With $129 billion still available, a 5-week extension has been approved. This extends the deadline for applying for a PPP loan from June 30 to August 8.

June 5 - Update on PPP Loan Forgiveness Requirements

PPP Loan Forgiveness requirements have been updated with a bill that has passed in Congress and was signed into law by the President. All PPP loan borrowers should know what the requirements are and what has changed.

April 24 - Update on the Paycheck Protection Program

Congress has passed an additional funding package that the President has now signed into law. This bill provides an additional $310 Billion to the Paycheck Protection Program. The bill also includes additional funding for the Economic Injury Disaster Loan program, with $10 billion to fund more emergency grants. Banks may be accepting applications now to be processed when the go-ahead is given.

Information continues to evolve rapidly as the stimulus plan as momentous as the Paycheck Protection Program from the CARES Act is implemented nationally. Our leaders have acted very quickly to provide relief and security through this crisis, but with an economy as complex as the United States’ economy, there are plenty of hurdles.

We recently have been receiving quite a few questions concerning the Paycheck Protection Program (PPP). On Monday, April 6, the Small Business Administration (SBA) released a document with additional guidance for the PPP.

With a program that impacts so many small businesses, there is bound to be many different interpretations or confusion surrounding unique business situations. It is our hope that we don’t confound the situation, so all the PPP information in this article comes directly from the SBA or Department of the Treasury.

Does my business qualify?

Small businesses with 500 or fewer employees qualify for a loan through the PPP. Non-profits, independent contractors, sole proprietors, and self-employed individuals also qualify for their own PPP loan.

Small businesses franchises in certain industries (such as the hotel and food service industries) may also qualify even if they have more than 500 employees.

What do I need to apply?

The SBA has allocated funds to many local banks to have available for their business communities. The bank may ask for a number of documents to determine your eligibility and loan amount. Ask your bank if they are participating in the Paycheck Protection Program and what information you will need to include with your application.

Participating banks have the liberty to direct applicants to their own online portal or electronic form. The Borrower Application Form is the form provided by the SBA.

What does this loan cover?

The PPP was put in place to cover payroll costs, and that includes the following:

  • Gross wages, salary, commissions and tips up to $100,000 per year for each employee
  • Costs of benefits including vacation, parental, family, medical and sick leave (excluding sick leave or family leave due to COVID-19, for which there is a different program called the FFCRA)
  • Severance payments
  • Payments for health care benefits
  • Payments for retirement benefits
  • State and local taxes on compensation
  • Employee’s portion of federal and FICA taxes

Payroll costs do not include:

  • Employer portion of federal and FICA taxes
  • Payments to sole proprietors or independent contractors (they will be eligible for a PPP loan themselves beginning April 10, 2020). Loan applicants that have filed or have been approved already do not need to take additional action for this change.

Additionally, the SBA allows small businesses to use the loan to cover rent and utility payments, mortgage interest, and interest on any other debts before 2/15/20. However, if more than 25% of the loan amount is used for these costs, the loan will not be eligible for forgiveness.

“This loan has a maturity of 2 years and an interest rate of 1%. Loan payments will also be deferred for six months.”

June 5 Update: PPP Loans have a maximum maturity of 5 years and an interest rate of 1%.

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How much money can I get?

According to the Interim Final Rule released on April 1, 2020, loan amounts are calculated with the following steps:

  • Step 1: Aggregate payroll costs from the last twelve months for employees whose principal place of residence is the United States.
  • Step 2: Subtract any compensation paid to an employee in excess of an annual salary of $100,000 and/or any amounts paid to an independent contractor or sole proprietor (updated April 6).
  • Step 3: Calculate average monthly payroll costs (divide the amount from Step 2 by 12).
  • Step 4: Multiply the average monthly payroll costs from Step 3 by 2.5.
  • Step 5: Add the outstanding amount of an Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020, less the amount of any “advance” under an EIDL COVID-19 loan (because it does not have to be repaid).

How will loans be forgiven?

For your PPP loan to be eligible for forgiveness, the following criteria need to be met:

  • Employer retains or rehires employees and maintains salary/wage levels for an 8-week period. “Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.”
  • June 5 Update: The 8-week period for maintaining employee and wage numbers has been changed to 24 weeks. This means that business owners have 24 weeks to return to pre-shutdown numbers. Read more
  • At least 75% of the loan amount must be used for payroll costs. Up to 25% need to be used for rent, utilities, or interest payments on mortgages.
  • June 5 Update: The 75% threshold for payroll costs has been updated to 60%. The other 40% needs to be used for rent, utilities, or mortgage interest. Read more

Your lender may provide you with a Request for Forgiveness form. These requests will require supporting documentation verifying the number of employees and pay rates, as well as what the loan money was used for. 


The PPP has limited funds, and therefore participating banks will grant loans after qualification on a first-come, first serve basis. The Program is available until June 30, 2020, or until funds are exhausted.

Find Eligible Lenders   ·   Paycheck Protection Program FAQs   ·   Faith-Based Organizations FAQs

SBA Paycheck Protection Program Webpage

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Topics: Insider- Updates- Advising- Payroll- Recession- Coronavirus

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