Paycheck Protection Loan Program Rules

Application and Loan Amount Rules – Summarized:

This new loan is eligible for small businesses and non-profits with fewer than 500 employees. There are special eligibility rules for restaurant and hospitality companies with more employees in total, but fewer than 500 employees per location.

Some of the typical SBA loan requirements have been removed from these loans, although others may remain intact. Specifically, these loans will not require a personal guarantee, no collateral and the SBA is guaranteeing 100%. (Typical SBA loans require personal guarantee and collateral from the business owner(s) and only offers a 75% guarantee).

The Maximum Loan Amount is calculated as: Monthly Average “Payroll Costs” multiplied by 2.5.

The Monthly Average is based on either:

  • 1 – year period prior to the loan, or
  • (for seasonal businesses) 12-week period from 2/15/19 (or at election of recipient 3/1/19) ending on 6/30/19, or
  • if business was not in business during 2/15/19-6/30/19 then the average is from 1/1/20 – 2/29/20.

“Payroll Costs” are defined to include:

  • Compensation: Salary, Wage, Commission or Similar (including owner compensation)
  • Cash Tips
  • Vacation, Family/Medical/Sick/Parental Leave
  • Allowance for Dismissal or Separation
  • Group healthcare benefits, including insurance premiums
  • Retirement benefit payments
  • State or local taxes on employee compensation (i.e. SUI)
  • Payments to sole proprietor or independent contractor that is a wage, commission, income.

“Payroll Costs” specifically exclude:

  • Compensation per individual over $100,000.
  • Federal Payroll Taxes
  • Employees whose primary residence is outside the US
  • Qualified Sick Leave wages under 7001 of the Families First Coronavirus Response Act
  • Qualified Family Leave wages under 7003 of the Families First Coronavirus Response Act

Loan Forgiveness Rules – Summarized:

The Potential Forgiveness Amount equals the sum of the following qualified expenses that are incurred and payments made during the Covered Period (8-Weeks beginning on the Loan Origination Date):

  • Payroll Costs that is 75% or more than historical amounts
  • Payments of Interest on ‘covered’ mortgage obligations
  • Payments on ‘covered’ rent obligations
  • ‘Covered’ Utility Payments

“Payroll Costs” are defined the same as in the Application Process described above.

“Covered” expense noted above is an expense that was in place prior to 2/15/20 (i.e. not a new rental, new utility or new loan entered into after 2/15/20).

The Potential Forgiveness Amount is then reduced to the lesser of the Principal Borrowed or the Eligible Expenses adjusted by 2 possible reductions:

  1. Reduced to the ratio of Full-Time-Equivalent (FTE) employees during the Covered Period (8 weeks), divided by (at the election of the Borrower, or first option if taking Seasonal approach) either:
      • The Average # of FTE’s during 2/15/19-6/30/19, OR
      • The Average # of FTE’s during 1/1/20 – 2/29/19
    • Example: If FTE’s are 20 during the Covered Period, but were 25 during the historical period, then ALL Eligible Expenses will be multiplied by 80% (20/25 = 80% x Eligible Expenses)
  1. Further reduced by any reduction in wage of each employee, by more than 25% compared to their average wage during the most recent full quarter the employee was employed before the Covered Period. (This only applies to employees making less than $100k in annual compensation).  
    • Example: If an employee made $1,000 per week last quarter, but is then paid $600 per week during the 8-week Covered Period, then they are deemed to have a reduction of 40%, which is greater than the 25% threshold. The resulting adjustment would be a reduction of $150 per week ($1,000 x 75% - $600). If that pay reduction continued during the entire 8-week period, the Eligible Expenses would be reduced by $1,200 due to that one employee.

Other Notes:

  • FTE’s shall be calculated based on pay periods falling within a given month
  • Tipped or commission employees may need to receive additional wages to meet the 75% / 25% threshold and allow the company to receive the full loan forgiveness amount.
  • Reductions to FTE’s and Salaries that were made between 2/15/20 and 30 days from the Enactment of the Act (4/26/20) will be excluded from these calculations, provided the FTE’s and/or the Salary Reduction is corrected by 6/30/20.

The information we are seeing here varies drastically. We should receive more clarification from the banks this week.   You should also complete SBA form 1919.   If you have not, contact the banker to reserve time with the bank and to receive any additional info from the bank. 


 SBA Paycheck Protection Loan Program request list

(Anticipated List as of 3/28/2020)

Information based on the law:

  • 2019 Year-End Payroll Reports
    • Payroll Summary Report (from payroll provider or internal)
    • Forms W-3 and all W-2s
    • Quarterly State Unemployment Insurance (Form UITR)
    • All Form 1099’s issued during 2019
  • Additional Payroll Data on a monthly basis for Calendar Year 2019, and Year-to-Date 2020:
    • Start Dates and Termination Dates that occurred during 2019 or 2020
    • For hourly employees - their hours and pay rate on a monthly basis
    • Monthly Health Insurance Expenses paid by the Company for 2019 and 2020
    • Employer contributions for retirement accounts, and when payments were made.
      • Note for Retirement Contributions: Examples might be Company Matching, Profit Share Payments and the like, not payments for employee deferrals.
    • Please highlight any employees who may reside outside the US
  • List of current employees, current pay rate, and expected wages during the 8-week period following the loan.
  • Summary of rent expense with notes of expected changes to these amounts in the next 3 months
  • Summary of utility expense with notes of expected changes to these amounts in the next 3 months
  • Complete a summary of existing company debt.
Additional Information Typically Needed by the SBA: (All these items may not be needed – but should be made available to expedite the application process.)
  • 2017, 2018, 2019 Company Tax Returns (Or 2016 Tax Return + 2019 Financial Statement if tax return is not complete).
  • Monthly P&L for 2019
  • Monthly P&L for 2020 (to date)
  • Most current Balance Sheet
  • (Most Likely Not Needed) Personal Financial Statement for all owners greater than 20% - Standard SBA PFS form can be downloaded on our website.