What Is the Paycheck Protection Program? A Detailed Guide

what is the paycheck protection program ppp relief

"What is the Paycheck Protection Program?" This is something that many people ask, but few are aware of unless they own businesses. 

The Paycheck Protection Program (PPP) is one of the best things to come out of 2020 in terms of coronavirus aid. Most businesses had drastic losses of revenue, but the government launched the PPP to help them stay afloat during a time in which no one was spending money. 

So what is the PPP? Read on to learn everything you need to know about this Covid-19 pandemic government relief program! 

What Is the Paycheck Protection Program? 

The Paycheck Protection Program (or Payroll Protection Plan) is a loan program that was launched by the government as a form of aid during the COVID-19 pandemic. This program is targeted towards businesses and offers low-interest loans that can be paid off over a long period. 

A business can receive just one PPP loan and the amount will vary depending on the cost of payroll. Payroll includes all expenses that go towards employees. Things like salaries, wages, benefits, and commissions are all included in payroll. 

If you apply for a PPP loan, you can expect to get about 2.5 times the amount of your average monthly payroll costs. You can then use the money to cover any business-related expenses. 

Paycheck Protection Program Eligibility 

One of the main things that a business needs to have to qualify for the Paycheck Protection Program is the size of less than 500 or fewer employees. They also need to show that their business was affected by the coronavirus. During the PPP application, you'll certify that the request is necessary. 

The PPP focuses on those in the accommodation and food industries, so restaurants and hotels are the most common types to receive funding. However, independent contractors and franchises that are independently owned are also eligible. 

How to Apply for PPP Loans 

To get a PPP loan, you must apply at participating lenders. Although the program was created by the Small Business Association (SBA), it's being administered by other lenders. In most cases, you'll need to open an account with one of the lenders if you'd like to get a loan. Most banks don't offer loans to those without accounts. 

If you do have an account, you can consult with them to see what can be done. They'll guide you through the process and work with you to ensure that you get compensation. When you want to apply, go through the SBA's website so that you can be redirected to the correct page. 

Applying for PPP loans is a simple process because you can go to the SBA's website and download their application form. You'll need to prove that your business was operating on February 15, 2020, and must list your average monthly payroll costs. You can then submit this form to a lender. 

Deadline 

The deadline for the Paycheck Protection Program was on August 8, 2020. This means you can no longer apply for a PPP loan. However, there are talks of a stimulus package that could renew the PPP, so stay up to date with new information to ensure you're one of the first to apply. 

How Forgiveness Works 

Loan forgiveness is something that you should seek because it means you could avoid paying back part or all of the loan. This would require you to keep or rehire full-time employees within 5 months of getting the loan. 

Some of the things that can be forgiven are what businesses often spend the most money on. The main cost that can be forgiven is employee payroll. This will include salary, wages, commission, and benefits. Sole proprietors can also get forgiveness for their earnings from self-employment. 

Seasonal businesses can seek forgiveness for their payroll between February 15 and June 30 of 2020. New businesses can seek forgiveness for payroll between January 1 to February 29 of 2020. 

All of these things can be forgiven, but each is capped at $100k. For example, if you want to get forgiven for employee payroll, the most you could get is $100k per employee. 

If you want to request forgiveness (it doesn't hurt to try), you must submit a forgiveness application to the SBA. If you're self-employed, you can submit the "EZ" version, which requires less documentation. 

Difference Between PPP and EIDL 

Alongside the PPP came another program, the Economic Injury Disaster Loan (EIDL). The EIDL program is different in that it's designed to help businesses recover from revenue loss during an emergency. 

When applying for this loan, you can get an advance of up to $10,000 ($1,000 for each employee). If you're an independent contractor, you'd only get an advance of $1,000 because you're 1 employee. 

The PPP loan can be completely forgiven if you follow all of the guidelines whereas the EIDL must be paid back. You can apply and receive both loans, and your applications will go through Paycheck Protection Program audits by the SBA before being approved. 

Stay Informed of Future Changes 

After reading this article, you no longer need to ask yourself, "what is the Paycheck Protection Program?" While this loan can no longer be applied for, it may come back when the next stimulus package is launched. However, we may be waiting a few months until changes are made to help assist in the global economic recession. 

We encourage you to stay up to date with what's going on in the government. There are current tensions between the Republicans and Democrats, which is what's making the stimulus package take forever to pass. Once it does, you can expect to get various forms of relief to stay afloat during the Coronavirus pandemic and economic fallout.

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