How Much Money Can Your Business Get From the Paycheck Protection Program?

Make sure you understand the basics about PPP loan eligibility, maximum loan amounts, and PPP loan forgiveness.



Authorized under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the Paycheck Protection Program (PPP) provides loans to small businesses impacted by the coronavirus (COVID-19) pandemic. The loans—which are fully forgivable—are intended to cover payroll and other operational costs for businesses forced to close or limit operations due to COVID-19.

Can I Apply For a PPP Loan?

You are eligible to apply for a PPP loan if you are:

  • a small business with 500 or fewer employees whose principal place of residence is in the United States
  • a sole proprietor, an independent contractor, or a self-employed individual
  • a small business concern that meets the SBA’s size standards -- either employee size standards or alternative size standards (tangible net worth of less than $15 million as of March 27, 2020 and average net income of $5 million or less after federal income taxes and excluding carry-over losses for the two fiscal years prior to the application)
  • a Section 501(c)(3) non-profit
  • a Section 501(c)(19) veterans organization
  • an SBA-designated tribal business entity, or
  • a hospitality or food service business (with a NAICS code beginning with 72) with 500 or fewer employees per location.

In addition, you must make several certifications on your loan application, including that your business:

  • was in operation on February 15, 2020
  • was affected by Coronavirus (COVID-19), and
  • needs the funds to "support . . . ongoing operations."

To determine how many employees you have, use the average number of employees for each pay period during the prior 12 months or from calendar year 2019. If your business has been operational for less than 12 months, use the average number of employees for each pay period that you were in existence. When counting the number of employees, part-time employees count the same as full-time employees.

An eligible nonprofit, veterans organization, or tribal business must have 500 or fewer employees whose principal place of residence is in the United States or, if bigger, meet the SBA employee-based size standards for the industry in which it operates.

What Is the Maximum Amount of a PPP Loan?

The maximum amount of money you can borrow through the PPP is 2.5 times your average monthly payroll costs, up to a maximum of $10 million. That means, for example, if your average monthly payroll in the last 12 months was $100,000, you could borrow up to $250,000.

You can also add to your loan amount the outstanding amount of any Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020, less any “advance” that is forgivable under an EIDL COVID-19 loan.

How Do I Calculate Average Monthly Payroll Costs?

You should include in payroll costs:

  • salary, wages, commissions, and tips, up to $100,000 per employee per year (don't include payments to independent contractors)
  • employee benefits including vacation, parental, family, medical, or sick leave costs; allowance for separation or dismissal; payment for group health care coverage benefits, including insurance premiums and retirement, and
  • state and local taxes on compensation.

If you are a sole proprietor, an independent contractor, or self-employed, your payroll costs include wages, commissions, income, or net earnings from self-employment, up to $100,000 per year.

To calculate your average monthly payroll, use the 12-month period prior to the loan date or the previous 12 months. Seasonal businesses can calculate their average monthly payroll costs based on the 12-week period beginning February 15, 2019 or March 1, 2019 and ending June 30, 2019; or any consecutive 12-week period between May 1, 2019 and September 15, 2019.

How Much Can My Business Borrow?

To calculate how much you can borrow, follow these steps.

Step 1: Add up your total payroll costs for the applicable 12-month period. Exclude any portion of compensation in excess of $100,000 per year.

Step 2: Calculate your average monthly payroll costs by dividing your total payroll costs (from Step 1) by twelve.

Step 3: Multiply your average monthly payroll costs (from Step 2) by 2.5.

Step 4: Add the outstanding amount of any Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020, less any “advance” that is forgivable under an EIDL COVID-19 loan.

The total amount you get based on these calculations is the maximum you can receive for a PPP loan, up to $10 million. Depending on your situation, there may be other factors that affect this number when you actually apply for your loan.

How Do I Qualify for Loan Forgiveness?

Your PPP loan will be forgivable—meaning you don't have to pay it back—if you spend the money on certain permitted expenses. To qualify for forgiveness, you must show that during the first eight weeks after disbursement of loan funds, you spent at least 75% of the loan proceeds on payroll (including benefits), and the remainder—up to 25%—on:

  • interest on mortgage obligations incurred before February 15, 2020
  • rent under lease agreements in effect before February 15, 2020, and
  • utilities, for service that began before February 15, 2020.

The amount that is forgiven will be equal to the amount that you spend during that eight week period on permitted expenses.

Your loan forgiveness will be reduced, however, if:

  • you decrease salaries and wages by more than 25% for any employee that made less than $100,000 in 2019, or
  • you decrease your full-time employee headcount and don’t restore your full-time employment and salary levels by June 30, 2020.

If any portion of the loan is not forgiven, you will have to pay that money back within two years at an interest rate of 1% with no prepayment penalties.

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