Who Can Get a Paycheck Protection Program Loan?
In general, a small business is eligible for a loan up to $ 10 million from the Small Business Administration’s Paycheck Protection Program if its primary establishment is in the United States, it was operating on February 15, and it either has employees with salaries and payroll taxes, or hiring independent contractors.
Businesses can apply for a PPP loan through their bank or other financial institution, which then submits the application to the SBA. As of mid-May, applications had still not been accepted for the 310 billion dollars in loans which Congress approved in its second round of funding. The SBA guarantees 100% of the loan, and the full amount could potentially be forfeited.
Tax-exempt non-profit organizations, tax-exempt veterans organizations, tribal businesses, and self-employed workers are also eligible. Certain foreign companies with employees based in the United States may also be eligible.
While small businesses are often defined as businesses with 500 or fewer employees, the SBA actually calculates eligibility based on industry standards. A knitwear mill, for example, is not eligible for a loan if it employs more than 500 people, while the employment limit for a carpet and rug mill is 1,500. Other small businesses, such as farms, restaurants, and retail stores, are categorized based on their gross receipts rather than the number of employees.
Businesses are not eligible for PPP loans if they are engaged in illegal activity under federal, state or local law, says attorney Samantha Monsees of Fisher Phillips in Kansas City, Mo. This likely excludes marijuana dispensaries. , which are legal in some states but not others, and “most small businesses primarily and substantially engaged in the gambling business”.
The SBAs Standard operating procedure 50 10 5 includes a list of businesses not eligible for loans, including finance companies, passive real estate companies, and insurance companies. Households employing nannies or housekeepers are not eligible.
The American Civil Liberties Union and other civil rights groups sued the SBA for excluding business owners with criminal records from the program. Maryland U.S. District Court Judge Catherine Blake ruled that these exclusions were illegal.
People with past due or defaulted SBA loans or loans guaranteed by other federal agencies within the past seven years also cannot apply for a PPP loan.
In addition to the application, borrowers must submit documents to the lender, such as payroll processor records, income tax returns, or IRS Form 1099-MISC. Borrowers who do not have these documents must provide other supporting documents, such as bank statements, to demonstrate the amount of eligible payroll.
At least 60% of the loan must be used for wage costs, which include salary, wages, tips, vacation pay and parental, family, medical or sick leave. Salary costs also include severance or termination benefits, and benefit payments such as group health coverage and retirement.
This story has been updated to reflect changes made to the SBA Paycheck Protection Program loan program on 6/6/20 and 6/12/20, and to reflect a court ruling that allows people with a criminal record to apply for paycheck protection program loans.
Editor’s Note: The Paycheque Protection Program resumed acceptance of applications on July 6 in response to the Paycheck Protection Program Extension Act. The new deadline to apply for a Paycheck Protection Program loan is August 8.
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