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What is PPP Loan, Eligible Criteria, Financial Documentation You Need

What is the Paycheck Protection Program (PPP)?

Paycheck Protection Program second round is about to initiate. SBA will start collecting the applications on January 19, 2021. This PPP loan not only helps small corporations but also provides financial support to the employees working in these firms.  The amount is provided under the CARES act assigned by President Donald Trump in 2020.

The second round comes with ease and convenience as compared to the initial round.  The process is now simple and unlike the first time which accepted applications for only 13 days, this time no big corporation will be allowed to apply for the loan.  Sole owners can also benefit a lot from this program.  Single owners can easily determine the loan amount and apply for loan forgiveness as well. 

How Does the PPP Loan Work?

  • PPP loans are given to provide economic relief to the businesses and companies that have suffered economically due to COVID-19.  PPP loans are given under the CARES act, which includes $350 billion in PPP loans.  Later Congress authorized to provide $320 billion more funds.
  • It provides means to small firms to carry out their routine business matters that are devastated by the pandemic. It is also said to be the new form of SBA (Small Business Administration) loans.
  • PPP loans are 100% forgiven provided you used the funds in the legal and authorized way.


Am I Eligible For a PPP Loan?

PPP loans are solely for small businesses and freelance workers. You can apply for this 2nd round of PPP if you have already qualified for the first round. The eligibility criteria of businesses that fall under the Payment Protection Program include: 

  • Small industries, charity firms, agriculture sector operatives that meet the SBA designated criteria
  • Freelance individuals or independent workers
  • Small new corporations,  housing enterprises, and organizations that fall under 501(c) (6)

Also, this round of assistance is meant to target smaller businesses. You can apply for the second round of the Payment Protection Program even if your company is operating in multiple cities provided you have qualified for CARES act. But, you must have less than 300 workers at each location.

The second condition is that you must have used all the amount that you got in the initial round of the Payment Protection Program for lawful purposes, before the payment date of the next PPP loan.

Many companies could not apply for the SBA loan. It includes the lobbying companies and businesses that have a relationship with China. Similarly, Public listed companies also do not qualify for a Payment Protection Plan. 

What Can a PPP Loan Be Used For?

PPP loans are solely to benefit employees and fund the staff in your company.  So, you need to make sure that you spend the maximum amount that you get from PPP loans on the welfare of your employees.  

You can spend the remaining amount on the following things: 

  • Paying loan interest amount
  • Paying for the rental property 
  • Utility bills 
  • Procedural  expenses on tools and software’s 
  • Property damages not covered in the insurance 
  • Seller costs which include the payment of  services provided to you
  • Employee protection expenses to be COVID-19 compliant

Following these guidelines can ensure all your loan amount is forgiven. But if you are unable to spend the funds correctly, then you could face fraud charges. 

How Much PPP Funding Can I Receive?

You can borrow the money through the Payment Protection Plan. The amount you get under this plan depends upon your monthly payroll costs. You should eliminate the usual monthly payroll expenses or any reimbursement that is higher than $100,000 per worker i.e. if you are paying $15,385 per worker.

The payment for emergencies, holidays, sick leaves, insurance payments can be included in the applications. This also includes medical payments for your employees, retirement funds, payment of national and local taxes evaluated on wage earner reimbursement.

PPP Loan Requirement

PPP loans are focused on your employee retention rate. It aims to protect paychecks. To fully qualify for PPP loans you must have average or more than average full-time workers in your company during the whole pandemic period. If you have successfully retained the workforce of your company during the last year then you are eligible to get the loan. But, you have to invest more than 50% of the loan amount on the payroll. 

If you need forgiveness in loan amount then you need to make sure that

  • Do not decrease the salary of your employees by 25%
  • Retain your workforce

PPP loans applications start on 19 January 2021. You must check to see if you meet the eligibility criteria. If you meet the requirements and you are a small business owner, then you can apply for PPP loans. 

How Do I Apply For a PPP Loan?

You will have to fill out the application provided by SBA on their website. You need to download the loan application form and enter the required information. Along with filing the form, you will also need some important documents to complete the procedure.

  • You need to provide a tax return from 2019
  • Payroll amounts that you paid your employees in salaries
  • Complete payroll report to justify your application for the loan
  • All the documents about your company or organization that provide details regarding ownership
  • You will also need to provide how Corona affected your business, and how you are hit financially by the virus
  • Provide all the details regarding employees whether they are outside the USA or reside in the country
  • You need tax returns for the last year, if you have the record of the last two tax returns then you will need those as well. 
  • For the 2nd PPP round, you need to justify how you have used the amount paid in the first round of PPP. You will also need all the required documentation

Financial Documentation for PPP Loans

Documentation is required when you are filing for PPP loans. This includes: 

  • Payroll records
  • You will need the payroll taxes you paid from 2019
  • Schedule C for exclusive ownership
  • Payroll report which will include all the details of the payment you made to your employees
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