Trying to make sense of the Paycheck Protection Program (PPP)? The loan program was launched by the Small Business Association (SBA) in early April 2020 to help small businesses keep their workforce employed during COVID-19.
When initially created by Congress, the PPP emergency relief fund allocated $349 billion for small businesses. However, in 12 short days, those funds were depleted and less than 5% of America’s small businesses were served.
Thankfully, on April 23, Congress passed an additional $310 billion to expand the program and help more small businesses access critical funding.
We asked Sam Taussig, Head of Policy at Kabbage — a growing fintech company helping small businesses access PPP funds — to answer the questions small businesses may have about the new government funds.
The additional funding from Congress means the remaining 95% of small businesses, most of which have fewer than 20 employees, have another chance at applying or securing the funds.
When small businesses are approved by the SBA for PPP funding, lenders will issue funds within 10 business days.
If your small business was denied for the PPP by the SBA, reapplying is, unfortunately, not an option. You can apply for the Economic Injury Disaster Loan (EIDL), which is also offered by the SBA. It is also a low-interest long-term loan to support small businesses during this crisis.
On another note, if you already applied with a lender before the first round of funds ran out and have not yet heard back, your application still stands and you do not need to reapply. However, this does mean there’s an existing queue of applications across the U.S. that will be pushed to the SBA once it resumes accepting PPP applications. The best thing to do is apply as soon as possible with the lenders of your choice.
The funds are earmarked to cover payroll costs and retain staff. If 75% of the funding is used to cover existing payroll, the loan will convert into a grant and small businesses will owe nothing. The remaining 25% must be used to cover mortgage interest, rent, and utility costs.
If a business does not spend at least 75% of the loan on payroll, the funds could convert into a two-year loan with a 1% interest rate. The SBA is still issuing guidance on loan forgiveness, you can read the latest details.
Kabbage, a small business credit provider approved by the SBA, is accepting PPP applications for any small business, whether you’re a customer or not. In addition, online marketplaces such as Lendio will help place PPP loan applications through multiple approved lenders.
Small businesses can also apply at credit unions and local banks, as they currently serve main-street businesses in their communities. To find SBA-approved lenders across the nation, use this tool they created. Keep in mind, some banks may require small businesses to have a prior lending relationship with them to apply.
Generally, businesses that have fewer than 500 employees and have been in business since February 15, whether they’re an LLC, corporation, sole proprietor, or independent contractor are eligible. In our guide to the Payment Protection Program, you can find specifics on types of businesses.
Small businesses also need to submit all required documents in the application process. Check out this handy list of required documents you’ll need depending on your business structure.
Loans from PPP are calculated as 2.5 times the average monthly payroll for a business.
As you’re calculating, remember the SBA has capped PPP loans at $10 million. Different lenders may have different caps; for example, Kabbage is processing PPP loans up to $2 million as it focuses on main-street businesses that may need lower amounts of funding.
It depends on the lender, their ability to process and accept your application, and the SBA’s speed to provide final loan approval.
Since this is a first-come, first-served program, the best thing you can do is apply as soon as possible. Plus there’s no credit check associated with a PPP loan, so there’s absolutely no risk in trying.
Make sure you have the appropriate tax filing and payroll documentation prepared so you can streamline the paperwork and are more likely to get approved. As mentioned earlier, our list of required documents required based on the business structure can help.
For more resources, visit the SBA’s website.
Are you hoping to get additional funds for your small business? Check out the Salesforce Care Small Business Grants offering, it illustrates Salesforce's commitment to small and growing companies.
Salesforce helps you find more customers, win their business, and keep them happy so you can succeed. Learn more about our small business CRM solutions by following us on Twitter, LinkedIn, and Instagram. Plus, join the Small Business Strong LinkedIn group, a worldwide network for small businesses to access resources and connect with one another.
For more business and leadership inspiration, check out our entire Leading Through Change series.