Paycheck Protection Program FAQ

Find the most frequently asked questions for the Payment Protection Program loan below. If you can’t find an answer to your question, please notify us through the form on this page.


Who is eligible for the Paycheck Protection Program?

Business with 500 or less employees, sole proprietors, independent contractors, and self-employed individuals who were in operation on February 15, 2020

See page 5-6 of the Paycheck Protection Program – Interim Final Rule for details.

What are the loan requirements?

  • The business must have been in operation before February 15, 2020.
  • The business must be classified as a “small business,” and have less than 500 employees, or meet the SBA size standards for the industry. Small businesses include:
    • Sole proprietors
    • Independent contractors
    • Non-profit organizations
    • Veterans organizations
    • Tribal concerns
  • The business must have suffered a negative economic impact from COVID-19, including:
    • Supply chain disruptions
    • Staffing challenges
    • Decrease in gross receipts or customers
    • Business closure
  • Employee and compensation levels used to calculate the loan must be maintained for 8-weeks from the loan origination date.
  • The loan proceeds must be used for appropriate expenses
    • Payroll expenses
    • Interest on mortgage payments (NOT principal)
    • Rent expenses
    • Utilities

Can I receive a loan under both the Paycheck Protection Program (PPP) and the Economic Injury Disaster Loan (EIDL)?

Yes, you can apply for both a Paycheck Protection Program loan and an Economic Injury Disaster Loan. However, the loan funds cannot be used for the same purposes. If you receive funds from both loan programs, make sure to adequately document the appropriate use of the loan funds.

At least 75% of the PPP loan funds must be used for payroll in order to qualify for maximum loan forgiveness. The other 25% can be used for mortgage interest, rent, and utilities. Any additional working capital needs can be funded by the EIDL program. If the EIDL funds are used for payroll, then the PPP loan must be used to refinance your EIDL loan.

Loan Terms

What are the PPP loan terms?

Loan term length is 2 years.

  • The original loan term was listed as 10 years, but it was changed to 2 years.
  • You can pay this loan off earlier than 2 years since no prepayment penalties or fees will be assessed.

Interest rate is 1% fixed rate.

  • The original loan interest was listed as “up to 4%,” then it was changed to 0.5%, but the rate was finalized at 1% fixed rate.

Payments of principal and interest will be deferred for 6 months.

  • Interest will accrue over this time period.

No borrower or lender fees, collateral, or personal guarantees are required.

How much can I borrow?

The amount is based on a calculation of average monthly payroll times 2.5 up to $10 million.

Payroll Calculation

How is the average monthly payroll calculated?

This is a somewhat complex calculation that looks at:

  • Payroll costs for the applicable time period
  • Subtract compensation for each employee in excess of $100,000
  • Add employer paid benefits for the applicable time period
  • Divide this number by the number of months included in the applicable time period

See page 8-9 of the Paycheck Protection Program – Interim Final Rule for details.

What payroll period should we use to calculate our average monthly payroll?

Banks have the discretion to choose the time period that will be used to calculate the average monthly payroll, so no matter what period you use, the banks could require something different. However, the SBA has given the following preliminary guidelines on which time period to use:

Businesses in operation in 2019:

  • Payroll costs are assessed using your average total monthly payroll costs from all of 2019, or any portion of 2019 that your company was in business.

Businesses not in operation in 2019, but started before February 15, 2020:

  • Payroll costs are assessed using your average total monthly payroll costs incurred in January and February 2020.

Seasonal businesses who started between February 15, 2019 and June 30, 2019:

  • Payroll costs are assessed using your average total monthly payroll costs incurred during the 12-week period beginning February 15 or March 1, 2019 (decided by loan recipient and ending June 30, 2019.

Seasonal Businesses who started after June 30, 2019:

  • This is our assumption: The government is trying to estimate your average monthly payroll for this equivalent time period last year. If you did not begin business until after June 30, 2019, we assume the bank will evaluate the payroll period of January and February 2020.

What qualifies as payroll costs when calculating monthly average payroll?

The SBA has stated that the following items are INCLUDED in the payroll cost calculation:

  • Salary, wages, commissions, and tips up to an annual pay of $100,000 to a single employee (excess is excluded)
  • Vacation, parental, family, medical, and sick leave
  • Allowance for separation or dismissal
  • Group health insurance premiums (employer’s portion)
  • Retirement benefits (employer’s portion)
  • State and local taxes assessed on the employee’s compensation


  • Payroll costs include only US based employees.
  • If an employee makes more than $100,000 annually, a maximum of $100,000 can be used in the calculation of total payroll expense.

The SBA has stated that the following items are EXCLUDED from the payroll cost calculation:

  • Portion of salaries in excess of $100,000 annual pay to a single employee
  • Federal payroll taxes
  • Compensation to foreign-based employees
  • Sick leave or family leave that has already been credited under sections 7001 and 7003 of the Families First Coronavirus Response Act (FFCRA) (Public Law 116-127).

See page 10 of the Paycheck Protection Program – Interim Final Rule for details.

What counts as "salaries, wages, commissions, tips" for the payroll calculation?

Different banks are allowing different items to be included in the payroll calculation. However, to calculate a preliminary amount, use the following guidelines.

The “salaries, wages, commissions, and tips” used in the payroll calculation will be for compensation that is subject to payroll taxes.

Types of pay that could be included:

  • Salaries
  • Regular Pay
  • Overtime Pay
  • Bonuses
  • Fed MED/EE Tax

Types of pay that would be excluded:

  • Reimbursements
    • These are generally for employee-paid expenses and are deducted before tax is assessed. These expenses would be included in an expense category other than payroll.
  • Allowances for phone, car, etc.
    • These would be expensed on the income statement under phone expense, car expense, etc. and not as a payroll expense.
  • Advancements
    • Including “advancements” in the payroll calculation would skew the average monthly payroll amount, since these are payroll expenses for a future time period.

Can independent contractors count as employees with the average payroll calculation?


The language in the CARES Act legislation initially made it seem like independent contractors could be used in the payroll calculation.

However, the SBA provided follow-up guidance stating that independent contractors (1099) should not be included in the payroll calculation. Independent contractors will be able to apply for their own PPP loan starting on April 10, 2020.

What are my options if I have already laid off my employees?

Many companies have already laid off employees. For companies to be eligible for full PPP loan forgiveness, they have until June 30, 2020 to restore employment and salary levels for changes made between February 15, 2020 and April 26, 2020. Rehired employees will not need to meet the usual 30-day minimum work requirement to qualify for the funds.


How do you apply for the Paycheck Protection Program?

Loans applications are being managed by Small Business Administration approved lending institutions. Check with your business bank(s) or credit union(s) to see if they are going to accept loan applications.

When can a business apply for the Paycheck Protection Program?

April 3, 2020: Small businesses and sole proprietorships can begin to apply for the PPP.

April 10: Independent contractors and self-employed individuals can begin to apply for the PPP.

Apply as soon as possible! The program is open until June 30, 2020. However, there are funding caps and lenders need time to process your loan. Applications will be processed on a first-come, first-serve basis.

What forms and documents will be required to apply to the Paycheck Protection Program?

Specific documents may vary by bank, but the U.S. Department of the Treasury has indicated the following:

  • SBA Form 2483
  • Payroll documentation

See page 15 of the Paycheck Protection Program – Interim Final Rule for details.

What type of lenders are participating in the Paycheck Protection Program Loan?

Most lending institutions (banks, credit unions) plus anyone else who is approved will service this program. Do not plan on going to the Small Business Administration (SBA) as they will not be servicing this program.

Lending Institutions:

  • SBA 7(a) lender
  • Any federally insured depository institution
  • Federally insured credit union
  • Participating Farm Credit System institution

Many Fintech companies are also lending.

Loan Forgiveness

How does the loan forgiveness work?


Over an eight-week period following the date of the loan, money spent on the following can be forgiven:

  • Payroll costs
  • Mortgage payment interest for mortgages started before February 15, 2020
  • Rent payments on leases started before February 15, 2020
  • Utility payments for service agreements started before February 15, 2020

Note that only 25% of the forgivable amount may come from non-payroll costs.

What happens to the balance of the loan that isn’t forgiven?

The balance will need to be paid back according to the terms of the loan.

See page 13-14 of the Paycheck Protection Program – Interim Final Rule for details.

What expenses are considered “utility” expenses?

So far, we have not found specific guidance from the Small Business Administration on what constitutes a “utility” expense.

However, for accounting purposes, the following items are usually acceptable “utility” expenses.

  • Electricity
  • Water
  • Waste disposal/Garbage
  • Heating (gas)
  • Sewage
  • Telephone
  • Internet

How do I request loan forgiveness?

You can request loan forgiveness through the lender who is servicing your loan.

You will need to provide the following documentation:

  • Payroll documents verifying the number of full-time equivalents and pay rates.
  • Payment documents for eligible mortgage, rent/lease, and utility obligations.
  • Certify that the forgiveness amount was used to keep employees.
  • Certify that the forgiveness amount was used to pay eligible mortgage, rent/lease, and utility obligations.
  • Certify that the documents are true and accurate.