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U.S. businesses with 500 or fewer employees (full-time or part-time) that were in operation as of February 15, 2020, qualify for an initial PPP loan. In some cases, a company with more than 500 employees can qualify, depending on type of business.
Tax-exempt organizations under 501(c)(3) or 501(c)(6) with 500 or fewer employees can qualify, as well as 501(c)(19) veterans’ organizations and certain American Indian tribe-owned businesses.
If the business previously received a PPP loan and has used, or plans to use, the full amount for eligible expenses, a “second draw” PPP Loan (PPP2) may also be available. Among other requirements to qualify, the business must not be permanently closed, generally have less than 300 employees and had a reduction in gross receipts of more than 25% in one quarter of 2020 compared to the same quarter in 2019.
For full details see the PPP overview (PDF).
Note that for businesses with an outstanding PPP loan, SBA approval may be necessary prior to a change of ownership. See SBA guidance for more details.
There’s a limit of one PPP loan per business, unless the business qualifies for a “second draw” PPP loan. The amount of PPP loan you can qualify for is determined by your business’s average monthly payroll costs (based on calendar year 2019 or 2020), multiplied by 2.5, and subject to a maximum of $10 million (for a first loan) or $2 million for a “second draw” PPP loan. In addition, hospitality and restaurant businesses (those with a North American Industry Classification System code beginning with 72), may use a 3.5 multiplier for determining the average monthly payroll when applying for the ”second draw.”
For the definition of “payroll costs,” see question 15 in this full FAQ (PDF). To estimate your PPP amount, use this PPP calculator. In addition, if you received an Economic Injury Disaster Loan (EIDL) from January 31, 2020, through April 3, 2020, and used it for payroll costs, a subsequent PPP loan must be used to refinance the EIDL (in other words, the EIDL must be rolled into the PPP loan).
PPP loan proceeds can be used for payroll, as well as to pay for mortgage interest, rent, and utilities during the forgiveness period or incurred during the forgiveness period and paid on or before the next regular billing date. In addition, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020 disturbances, and certain supplier costs and expenses for operations can also qualify for forgiveness. PPP loan proceeds can also be used for interest on other debt obligations, but those amounts aren’t forgivable.
No more than 40% of the loan forgiveness amount can be for nonpayroll expenses (such as mortgage interest, rent or lease payments, utilities, and others). Payroll expenses must be at least 60% of the forgiveness amount. Eligible rent and lease payments must be under an agreement signed before February 15, 2020. You elect which forgiveness period you would like to use (between eight and 24 weeks).
For more details, see question 12 in this full FAQ (PDF).
You decide which forgiveness period you prefer—any time between eight and 24 weeks from the date loan proceeds are disbursed.
Covered expenses (payroll, mortgage interest, rent, or utilities) are those that were paid or incurred during the forgiveness period. Payroll costs are considered paid on the day paychecks are distributed. Payroll costs are considered incurred on the day the employee’s pay is earned. If a cost is incurred but not paid during the final pay period of the forgiveness period, you can still count it in the forgiveness if you will pay it before the next regular payroll date.
Forgivable expenses include payroll, rent or lease payments, mortgage interest, and utilities. They can be paid or incurred within the forgiveness period, as long as ultimately they’re paid before the next regular billing date. In addition, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020 disturbances, and certain supplier costs and expenses for operations can also qualify for forgiveness. Interest on the PPP loan begins accruing on the loan origination date, but interest accruing during (and for 10 months after the end of) the forgiveness period is also forgivable.
At least 60% of the amount forgiven must be used for payroll expenses but can be as high as 100%.
For loans exceeding $50,000, the amount of forgiveness may be subject to reduction if the employee head count or certain salary levels are reduced.
For full details see the PPP overview (PDF).
Due to changes made by the Consolidated Appropriations Act, 2021, the forgiven PPP loan is not taxable and any eligible business expenses are deductible (to the extent otherwise deductible), even if paid by a PPP loan that is later forgiven.
Payroll expenses include employer payments for employee benefits consisting of group healthcare coverage, group life, disability, vision, or dental insurance.
Employer contributions for these group and other benefits for employees aren’t counted in the $100,000 cap on compensation. Owners of C corporations are the only business owners permitted to add health care benefit costs to payroll.
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