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PPP Loans: A Cheat Sheet

Posted: April 9 at 9:00 AM

NOTE: This contains information as of 4:00 p.m. on 4/8/2020. The Treasury continues to issue additional guidance on a rolling basis, and we will try to update accordingly.


1. Available to small business concerns[1](defined in § 3 of the Small Business Act, 15 U.S.C. 632).

2. Also available to any other business – including nonprofits, veterans’ organizations, Tribal business concerns, sole proprietorships, self-employed individuals, and independent contractors – ONLY IF such business (including its affiliates[2]) has:

a. < 500 or fewer employees; or

b. < the maximum number of employees permitted under SBA employee-based size standardsfor such industry; or

c. < 500 employees per location (applies only to hotel and food service businesses with NAICS codes starting with 72)

3. Affiliates[3] must be taken into account to determine whether a business meets the 500-employee limit (or the applicable SBA size standard), EXCEPT for businesses that:

a. are in the hotel and food services industries (must be business with NAICS code 72); or

b. are franchises in the SBA’s Franchise Directory; or

c. receive financial assistance from SBICs licensed by the SBA.

4. Business must have been operational as of February 15, 2020, and had employees and paid salaries and payroll taxes, or paid independent contractors.

5. Ineligible businesses:

a. Engaged in illegal activity (e.g., marijuana-related businesses)

b. Household employer

c. Owner of 20 % of equity of an applicant is incarcerated, on parole or probation, or convicted of a felony within the last 5 years

d. Applicant or any business owned or controlled by applicant or its owners have defaulted under an SBA or other federal loan within the last 7 years that caused a loss

e. Identified in 13 CFR 120.110 and SBA’s SOP 50 10, Subpart B, Chapter 2


1.Payroll costs” is defined[4] as the sum of payments of any compensation with respect to employees:

a. which INCLUDES

i. Salary, wages, commissions or tips (capped at $100,000 on an annualized basis for each employee);

ii. Employee benefits including costs for vacation, parental, family, medical or sick leave;

iii. allowance for separation or dismissal;

iv. payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit;

v. State and local taxes assessed on compensation; and

vi. For a sole proprietor or independent contractor: wages, commissions, income or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.

b. and EXCLUDES:

i. Compensation to employees outside of the US;

ii. Compensation in excess of $100,000 (i.e., cash – not comp attributable to payment for health benefits, state/local taxes assed on employee comp, etc.);

iii. Certain federal employment taxes; and

iv. Certain sick and family leave wages.

2. Loan Amount: Lesser of (i) $10MM and (ii) the amount obtained as follows:



(aggregate payroll costs “from the last twelve months”[5]


EIDL loan made between 1/31/2020 and 4/3/2020


3. Interest: 1.0%

4. Maturity: 2 years

5. Payments: commence 6 months after the date of disbursement; interest will accrue during that period.

6. Fees: Waived. No fees payable to SBA.

7. Personal Guaranty: NOT required. PPP loans are 100% guaranteed by SBA.

8. Collateral: NOT required

9. Lender: SBA-approved lenders (Treasury will approve more banks to make these loans, even if still ineligible to make traditional SBA 7(a) loans).

10. Credit Elsewhere: Waived. Borrower need not apply for other loans before PPP application.

11. Use of proceeds:

a. Payroll costs

i. IMPORTANT: At least 75% of PPP loan proceeds shall be used for payroll cost. Borrower must certify this upon application for a PPP loan and upon applying for loan forgiveness.

b. Mortgage interest payments (not prepayments or principal payments)

c. Rent payments

d. Utility payments

e. Interest payments on other debt incurred before 2/15/20

f. Refinancing an EIDL loan made between 1/31/20 and 4/3/20


1. Amount of Loan Forgiveness: Sum of payroll costs, interest payments on mortgage obligations, payments on covered rent and covered utilities during the eight-week period commencing on the date of the first disbursement of the loan.

a. However: Only 25% of the loan forgiveness amount may be attributable to non-payroll costs.

b. Importantly, PPP loan forgiveness will not constitute cancellation of debt income. Accordingly, the amount of PPP loan forgiveness will not be included in gross income.

2. Subject to reduction due to furlough or wage reduction.

a. Loan forgiveness amount will be reduced if there was a reduction in average number of fulltime (FT) employees or wages between during eight-week period starting on the date of the loan.[6]

i. Example: Last year, a business known as ABC had an average of 100 FT employees between 2/15/19 and 6/30/19. In 2020, due to the coronavirus pandemic, ABC furloughs 75 employees. Then, ABC obtains a $1MM PPP loan but does not re-hire any furloughed employees. Thus, only $250,000 of ABC’s PPP loan may be forgiven.

$1MM PPP loan


25 FT employees during 8-week period


$250K forgiven

100 FT employees 2/15/19-6/30/19

EXEMPTION: such reduction is eliminated by 6/30/2020 (i.e., furloughed employees are rehired, wages are increased, etc.).


1. Application form: Click here. (Note: Some lenders are setting up online portals for applications.).

2. What other documents will a lender need from an applicant? Below are some commonly requested documents:

a. Source documents for payroll costs used in loan amount calculation (W-2’s, evidence of retirement or healthcare benefit payments, Excel spreadsheet of calculations, etc.)..

b. Documentation describing ownership of entity.

c. Identification of each signatory/owner (driver’s license, passport, etc.).

d. Lender’s supplemental application form, if any.

e. Organizational documents (certificate of formation, LLC or partnership agreements, bylaws, member/shareholder agreements, etc.).

3. What will loan documents look like? For the promissory note, lenders may use a promissory note provided by the SBA[7] or their own note forms, provided they are consistent with the CARES Act and the rules/regulations issued in connection therewith.

4. I’ve heard that the application process has been unpleasant since the program went live on April 3. What does the loan application process look like right now? Do you have any tips for potential borrowers?

a. Many banks are focusing solely on existing clients are still wondering how to service such existing clients. The federal government hopes to clear the fog by issuing additional guidance on a rolling basis.

b. For businesses seeking to apply for a PPP loan, here are some tips to help streamline the process.

i. Determine the eligibility of your business first. The burden is on the applicant – not the lender – to determine whether such applicant is eligible to apply for a PPP loan. The applicant is also responsible for calculating its payroll costs (which, in turn, is key to calculating the loan amount and loan forgiveness amount). The lender will validate the calculations and the supporting documents. 

ii. Provide your payroll cost calculations in spreadsheet form. Lenders will need to review the calculations for your requested loan amount, including payroll costs, and spreadsheets are often the preferred way you can “show your work” to the lender. A spreadsheet will help the lender tie the requested loan amount back to the supporting tax documents for verification and will speed up their approval process.

iii. Determine whether your business may have affiliates. The clients should read through the SBA’s affiliation guidelines to make sure they qualify. Remember, for the purpose of employee-based size standard limitations, the number of employees of a business may also include employees of the parent/holding company, subsidiaries and other portfolio companies.   

iv. Don’t forget the 75% rule for use of loan proceeds. Companies should remember that >75% of the loan proceeds MUST be used for payroll or the loan will not be forgiven.

5. My business was approved for a PPP loan! When will we receive funds? Lenders must make the first disbursement of a PPP loan within 10 calendar days from the date of loan approval.


[1]small business concern” is a business entity which (1) is organized for profit; (2) has a place of business in the U.S.; (3) either operates primarily within the U.S. or makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor; (4) is independently owned and operated; (5) is not dominant in its field on a national basis; and (6) does not exceed the applicable SBA size standard for its industry (whether employee-based OR annual receipts based – including affiliates), as assigned based on its NAICS code. (See section 3 of the Small Business Act, 15 U.S.C. 632)

[2] See Part 3 of our article for common circumstances in which the SBA may find affiliation.

[3] See Part 3 of our article for common circumstances in which the SBA may find affiliation.

[4] This is key in determining loan amount and loan forgiveness

[5] Note that the application listed the twelve months of 2019, not the immediately preceding 12 months.

[6] Compared to average # of FT employees or wages between (a) at borrowers election, either (i) 2/15/19-6/30/19, or (ii) 1/1/20-2/29/20; or (b) for seasonal employers, 2/15/19-6/30/19.

[7] The Treasury recently suggested lenders could use SBA Form 147 but has since removed the link from its guidance. The Treasury may provide a new form of note in coming days.

If you have questions or would like to discuss further, please contact Trey DeLoach, Nikki Gibson, Ed McQueen or Ira Perez.


To view our COVID-19 Legal Services Resource Directory, please click here.