The CARES Act permits the Paycheck Protection Program’s (PPP) forgivable loans for small business owners to pay for up to eight weeks of payroll costs, including benefits and other costs. In addition to payroll, recipients also can use PPP funds to pay interest on mortgages, rent, and utilities.
For an in-depth fact sheet about the PPP program, review the U.S. Treasury’s fact sheet.
Can I apply more than once at different lenders?
An important fact to note from the Treasury document is that you cannot get more than one loan under the $349 billion Paycheck Protection Program. The federal government is taking steps to reduce fraud and suggests you should only submit one application to one lender.
What else isn’t permitted when applying for a PPP loan?
Financial institutions will be required to notify law enforcement if they detect fraud, money laundering, terrorist financing, or other criminal acts and the misuse of financial institutions.
Fraud and PPP loans
Regarding small business loans, a personal guarantee is a business owners legal promise to repay funds. Providing a personal guarantee means that if the business becomes unable to repay debt then the individual is personally responsible. The personal guarantee provides an extra level of protection to credit issuers, who want to make sure they will be repaid.
Although Paycheck Protection Program loans are not personally guaranteed*, if the proceeds are used for fraudulent purposes, the U.S. government will pursue criminal charges against you.
*For a traditional SBA 7(a) loan, a personal guarantee is required.
Applying for a Paycheck Protection Program loan
Many banks in the U.S. are only serving current customers at this time and the cap of available funds for these loans ($350 billion) is approaching. However, the Administration is asking banks to serve non-customers as well. Additionally, the spending cap is expected to be increased by $250 billion. As of April 10, the increased cap has not been approved.
In the meantime, make sure you are certified for a PPP loan. As part of your application, the Treasury Department states that you need to certify in good faith:
- Current economic uncertainty makes the loan necessary to support your ongoing
operations. - The funds will be used to retain workers and maintain payroll or to make mortgage,
lease, and utility payments. - You have not and will not receive another loan under this program.
- You will provide to the lender documentation that verifies the number of full-time equivalent employees on payroll and the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight weeks after getting this loan.
The documents required to apply include:
- IRS Form 940
- IRS Form 941
- Articles of incorporation
- Bylaws/operating agreement
- Color copy of all owners’ driver’s licenses
- Payroll summary report or employee pay stubs
- Most recent filing of IRS Form 1099-MISC
- Trailing 12-month profit and loss (P&L) statement
- Most recent business mortgage or rent statements
- Most recent business utility bill
Following the PPP rules and having patience can help you get the funds you need to keep your business financially stable.
Additional Resources
- SBA Paycheck Protection Program Loans FAQ - Released 4/6/20
- SBA Interim Final Rules - Released 4/2/20
- SBA FAQs on Participation of Faith-Based
- Organizations - Released 4/3/20
- SBA Interim Final Rules on Affiliation - Released 4/3/20
- SBA Summary of Application of Rules on Affiliation - Released 4/3/20
- Treasury FAQ doc - Updated 4/3/20
- SBA PPP Application - Updated 4/2/20
- Treasury Overview of PPP - Released 3/31/20
- Treasury Information Sheet for Borrowers - Released 3/31/20
- CARES Act Final legislation - Became law 3/27/20 (For PPP, especially pages 10-13 and 17-19)
