What is the Paycheck Protection Program and How Do I Apply? [UPDATED JULY 2020]

What is the Paycheck Protection Program and How Do I Apply? [UPDATED JULY 2020]

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Posted by EJ Brown

July 7, 2020

Update: July 2, 2020

The deadline to apply for the Paycheck Protection Program has been extended to August 8, 2020. There is still over $130 billion in unused funds through the program since the original application deadline on June 30. 

Congress is also expecting to pass another relief package

when they return from a two-week recess.

Update: June 9, 2020, 9:41 AM PST

On June 5, 2020, the

Paycheck Protection Program Flexibility Act (PPPFA)

was signed into law which overhauls the original PPP program. Changes include:

  • Longer time period for borrowers to spend the loan

    . Within the original terms, borrowers needed to spend PPP funds within 8 weeks of the origination of the loan. Now borrowers have up to December 31, 2020 or 24 weeks to spend the funds (whichever is earlier).

  • More flexibility on how to spend the funds

    . The new law reduces the percentage of the loan that must be spent on payroll expenses from 75% to 60%; however, partial loan forgiveness will be available for businesses that do not meet that 60% threshold. The new act does not change the categories of eligible expenses.

  • More time to rehire staff and restore their wages.

    Employees now have until December 31, 2020 to rehire staff and restore their wages. Business owners will need to document that they were unable to rehire their original employees or find similarly qualified individuals OR that they were unable to return to the same level of business due to COVID-19-related issues between March 1 and December 31.

  • More time to apply for loan forgiveness.

    Borrowers have up to ten months after their covered period to apply for loan forgiveness.

  • Payroll tax deferral available for all.

    Originally, employers could not defer their payroll taxes once the lender issued a PPP loan forgiveness. This restriction has been eliminated.

Learn more here:

On May 13th,

the US Department of Treasury (USDT) issued an update

about what businesses can expect regarding the enforcement of and repayment of PPP loans. 

Here are the two biggest changes that impact home service companies:

Businesses with loans under $2 million will not need to prove financial hardship.

If you applied for a loan under $2 million, you do not need to prove that COVID-19 negatively impacted your business; it will be taken as a given. Per the fact sheet, “any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith.” 

On the flip side, to make sure that bigger businesses are not taking advantage of the program, the SBA and Department of Treasury will be reviewing all loans over $2 million. 

This means small businesses won’t have to worry about a federal audit; however, you will still be responsible to submit documentation to the lending institution you received the loan through, and you’ll need to prove that you used the funding for qualifying expenses.

Seasonal businesses that were approved for PPP loans can apply for more money

On April 28, the USDT updated how seasonal businesses can calculate the size of the loan they’re qualified for. If your business was not operating at full capacity in February of this year, you can calculate your payroll expenses using data from 2019. “For seasonal businesses, the applicant may use average monthly payroll for the period between February 15, 2019, or March 1, 2019, and June 30, 2019.”

If you received funding prior to April 28, 2020 you can check if you’re eligible for a bigger loan and receive an additional payout from your lender.

See more here:


Get a summarized one-pager of the Paycheck Protection Program (PPP):

Part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the

Paycheck Protection Program

or PPP, makes federally guaranteed loans available to businesses that commit to retaining employees during the crisis. Employers that are able to maintain their workforce can seek forgiveness of the loan.

Small businesses and sole proprietors are eligible to apply for these loans beginning April 3, 2020. Independent contractors and self-employed individuals can apply on April 10, 2020.

We’ll walk you through what you need to know about the loans, how to apply, and frequently asked questions from home service companies.

The Details

The Paycheck Protection Program offers SBA-guaranteed loans that can be used to pay employee salaries and wages, including benefits, vacation, and paid sick leave, mortgage interest, rent, and utilities.

PPP loans are a part of the SBA’s existing 7(a) program which is a partnership between private financial lenders that issue the loan and the SBA which guarantees the loans. Because they are guaranteed by the SBA, no collateral or personal guarantee is required.

PPP loans are available to small businesses employing 500 or fewer employees and can include businesses structured as sole proprietorships and independent contractors. 

The loan amount is capped at two and a half times the monthly payroll cost (excluding any individual's compensation above $100,000), but no more than $10 million.

Loan payments will be deferred for six to twelve months with a term of up to 10 years and interest rates up to 4%.

Participants in the paycheck protection loan program are not eligible to receive the payroll tax credit also included in the stimulus legislation.

Loan Forgiveness

Loans will be forgiven in an amount equal to borrower’s spending during the 8-week period (“Loan Forgiveness Period”) following the origination of the loan on payroll, mortgage interest, rent and utilities. 

However, the amount of the loan that does not have to be paid back is reduced if employees are laid off or have hours/wages reduced (unless the employees are re-hired or the reduction reversed by June 30, 2020). 

The amount of the reduction in employees in the case of layoffs is determined by comparing the total number of full-time equivalent employees during the 8-week Loan Forgiveness Period described above to the total number of such employees during either of two time periods selected by the borrower: February 15 through June 30, 2019, or January 1, 2020 through February 29, 2020; the amount of the loan that can be forgiven is reduced in proportion to the reduction in full time equivalent employees.  

A similar test is applied to reduce the amount of the loan that can be forgiven where there has been a reduction in employees’ pay (other than pay of employees that made more than $100,000 in 2019): for this purpose pay during the 8-week Loan Forgiveness Period is compared to pay for the most recent full quarter before the Loan Forgiveness Period, and to the extent there is a more than 25% reduction in an employee’s pay then the entire reduction in pay results in a dollar for dollar reduction in the amount of the loan forgiveness.

Because of the potential impact of layoffs or pay reductions on the amount of the loan that will be forgiven, it is important to plan such layoffs and pay reductions carefully.

Example of the PPP for a Home Service Business

I am considering whether I have to lay off some of my technicians because of the downturn in business from the shelter in place order that has taken effect in my city. My monthly payroll cost is $200,000. I can now borrow up to $500,000 under the Paycheck Protection Program at 4%. 

I close on the loan on May 1, 2020. Since I will spend more than $500,000 on payroll, rent, and utilities in the 8 weeks after the loan is originated, the entire amount of the loan is forgiven. This permits me to continue to keep everyone employed at their current compensation during the downturn.

Who Is Eligible

Businesses with 500 or fewer employees, including sole proprietorships and independent contractors. Businesses that operate as franchises who have an SBA franchise identifier code are also eligible (without regard to the 500-employee limit).

How to Apply

As opposed to the EIDL loans for which you apply through the SBA, PPP loan applications should be made directly with a lender you have selected. 

According to the

Department of Home Treasury

, “You can apply through any existing SBA lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating.”

The application and a fact sheet about the program can be found here:


Find an SBA-approved lender through SBA’s Lender Match program:


Frequently Asked Questions

Should I rehire employees I just recently let go or furloughed? 

Every potential borrower should analyze their own financial situation, but in some cases the new loan provisions should make it possible to avoid or reduce layoffs or even hire back recently laid off or furloughed employees.

What are the rules here for owner/operators?


The new loan provisions permit sole proprietorships and independent contractors to participate in the new program like other small businesses. 

When will I be able to apply?


Small businesses and sole proprietors are eligible to apply for these loans beginning April 3, 2020. Independent contractors and self-employed individuals can apply on April 10, 2020.

What if I already have a bank loan? 

Many bank loans will require your existing lender to approve new loans, including loans like the new SBA loans, but because the new loans do not require collateral and are likely to be forgiven it may be easier than in the usual case to obtain such approvals; borrowers may also wish to check with their existing lender to see if the existing lender could make the new loan. 

Does borrowing under the new loan program affect my eligibility for any other benefits? 

If you take a loan under this new loan program you will not be eligible for the payroll tax credit also provided as part of the stimulus legislation. So it is important to analyze which program or provision will be more advantageous to use.

Online Resources

Get a summarized one-pager of the Paycheck Protection Program (PPP):

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