How To Apply For A Paycheck Protection Program (PPP) Loan For Coronavirus Relief
As a small business owner, the effects of COVID-19 probably hit close to home. Whether you’ve shuttered your business because of state laws or have had a decrease in revenue due to fewer customers, businesses around the world are facing financial challenges as a result of this pandemic. In the United States, President Donald Trump has taken steps to help small business owners through this challenging time, such as the passage of the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
One provision of the CARES Act that has gained a lot of attention nationwide is the Paycheck Protection Program (PPP). This program has received an overwhelming response from small business owners. If you own a small business and have employees on your payroll, the PPP loan may be beneficial for you. Keep reading to learn more about this program, how to know if you qualify, and how to navigate the application process with ease.
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How A Paycheck Protection Program Loan Could Help Your Small Business
The Paycheck Protection Program provides forgivable loans to qualifying small businesses. Borrowers may receive up to $10 million. The actual amount you qualify to receive is equal to two months’ of your monthly payroll costs, plus 25%. Payroll costs are capped at $100,000 annually per employee.
The funds for your loan should primarily be used to cover payroll costs. You can also use a portion to pay for rent, utilities, and mortgage interest. If you use your loan for these purposes, it will be forgiven. However, if you use your funds for other purposes, you will be required to pay back your loan. If you decrease your number of employees, salaries, or wages, you may also be required to pay back funds.
Other benefits of these loans are that no collateral is required, and you do not have to sign a personal guarantee. If you’ve been debating whether or not to lay off staff as a result of the coronavirus, the PPP can provide the funding you need to keep your employees working. More people keep their jobs, small businesses continue operations, and you won’t be stuck with a pile of debt when the pandemic comes to an end.
How To Apply For A PPP Loan
Does a PPP loan sound like it would take some of the financial burden off your business? If so, the next step is to submit your application. Unsure of where to begin? Keep reading for a step-by-step guide to applying for PPP funding.
1) Make Sure You Qualify
While a PPP loan may be easier to obtain than a traditional loan, you still must meet certain requirements to qualify. All businesses can apply for this loan, provided they meet the size standards set by the SBA. In most cases, this means 500 or fewer employees, although there are some exceptions for certain industries.
For-profit businesses, nonprofit organizations, independent contractors, sole proprietors, and other businesses may apply for the PPP loan. In order to qualify for loan forgiveness, you must maintain your payroll and number of employees and use your loan for a qualifying purpose. You will need to certify through good faith that you will use the loan for its intended purpose and that loan funds are needed by your business during this time of economic uncertainty.
2) Find A Lender
Once you’ve determined that you qualify for a PPP loan, the next step is to select your lender. You can apply through an SBA lender or a federally insured financial institution, including credit unions. Other regulated lenders may also offer the PPP loan. Start off at any financial institution you already use. Even if the PPP loan isn’t offered, they may be able to point you in the right direction. You can also use the SBA’s Lender Match tool to find an SBA lender online or in your area.
3) Complete Your Application
Once you’ve found a lender, you’ll be asked to complete the PPP loan application. The application is pretty short and straightforward. You will be required to provide some basic information about your business, including your legal structure, your average monthly payroll costs, and information for all owners with at least a 20% stake in the business. You must also state the purpose of the loan and answer several questions that will determine if your business is eligible for funding.
In addition to your application, you must also submit payroll documentation. This payroll documentation should back up the numbers from your application to determine if you qualify for a PPP loan and how much you qualify to receive. You should also make sure you have other documentation on-hand that may be required by your lender. This includes but is not limited to tax documents, employee W-2s, organizational documents, and government-issued identification.
4) Keep In Touch With Your Lender
While you wait for your loan decision, it’s important to keep in touch with your lender. Additional information or documentation may be required as your loan is being processed, so be on the lookout for emails or phone calls requesting this information. Failure to communicate with your lender promptly can cause delays in the application process … and receiving your funds.
Avoid These Common PPP Loan Application Mistakes
From falling for scams to submitting an application with inaccurate information, there are a few mistakes that could delay the processing of your loan or even put your identity and bank account at risk. Here’s what to look out for.
Don’t Just Bet On The Big Banks
It may be tempting to rush to the nearest bank to apply for your PPP loan. While you certainly can apply with the big players, borrowers are finding that working with smaller lenders is easy and funding is fast. Check with your local small banks and credit unions — or even give an online marketplace a go — to find the right lender for you.
Beware Of PPP Scams
While the PPP application process is quite easy and quick when compared to other SBA loans, there are scammers out there looking to take advantage of small business owners. Beware of shady lending websites that promise faster funding. You should only work with a reputable lender, so do your research before handing off your personal information.
Also, be on your guard when it comes to communications with the SBA or your lender. Make sure to check the email address of the sender or the phone number of the caller to ensure the communication is legit. If you’re unsure, you can always use the official website of the SBA or your lender to initiate contact.
Check Your Application For Accuracy
Always double-check that the information on your application is accurate. Make sure that your payroll information is up-to-date and all required documentation is current. A simple mistake can potentially delay your loan, so make sure that everything is accurate before it’s submitted for processing.
There are a few calculations that you must make sure are accurate before your application is submitted. Your average monthly payroll must be accurate and is used to determine your borrowing limits. The PPP application offers guidance on performing these calculations correctly, and you can also direct any questions to your lender.
What Happens After You Apply
Once you’ve found your lender and have submitted your application, it’s time to play the waiting game. Unfortunately, there is no status tracker that lets you check the status of your loan. Instead, you must wait to hear back from your lender in regards to whether your application is approved and when you should expect funds to hit your bank account.
If you haven’t heard anything, feel free to reach out to your lender, but just know that they are working as quickly as they can to help you secure your loan.
Learn more about receiving your PPP funds by checking out our post, When Will My Paycheck Protection Program Loan Be Funded?
Don’t let the impact of the coronavirus bring your business down without a fight. Check out loan options and other great resources in our COVID-19 hub. You can also explore our small business reviews to find additional funding options now and in the future. Good luck!