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Paycheck Protection Program (PPP) Loans

Application Acceptance Resumes | Paycheck Protection Program

PPP applications are again being accepted, with a new application deadline of August 8, 2020. The program has about $130 billion in funds remaining.

The Paycheck Protection Program (PPP) Loans program provides cash-flow assistance through 100 percent federally guaranteed loans to employers who maintain their payroll during this emergency. If employers maintain their payroll, the loans would be forgiven, which would help workers remain employed, as well as help affected small businesses and our economy to snap-back quicker after the crisis. PPP has a host of attractive features, such as forgiveness of up to 24 weeks (or through December 31, 2020, whichever comes first) of payroll based on employee retention and salary levels, no SBA fees and a deferral period to the date that SBA remits the borrower's loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period). Small businesses and other eligible entities will be able to apply if they were harmed by COVID-19 between February 15, 2020 and December 31, 2020. This program is retroactive to February 15, 2020, in order to help bring workers who may have already been laid off back onto payrolls. Loans are available through August 8, 2020.

Businesses can access the paycheck protection program as a recovery tool and option by contacting the Vermont Economic Development Authority (VEDA), their local bank, credit union or their local SBA office. As part of their PPP Application Package, VEDA has included a worksheet to calculate the estimated maximum loan amount and the estimated loan forgiveness amount.

What types of businesses and entities are eligible for a PPP loan?

Businesses and entities must have been in operation on February 15, 2020.

  • Small business concerns, as well as any business concern, a 501(c)(3) nonprofit organization, a 501(c)(19) veterans organization, or Tribal business concern described in section 31(b)(2)(C) that has fewer than 500 employees or fewer employees than established by the relevant industry code.
  • Individuals who operate a sole proprietorship or as an independent contractor and eligible self-employed individuals.
  • Any business concern that employs not more than 500 employees per physical location of the business concern and that is assigned a North American Industry Classification System code beginning with 72, for which the affiliation rules are waived.
  • Affiliation rules are also waived for any business concern operating as a franchise that is assigned a franchise identifier code by the Administration, and company that receives funding through a Small Business Investment Company.

What are affiliation rules?

They become important when SBA is deciding whether a business’s affiliations preclude them from being considered “small.” Generally, affiliation exists when one business controls or has the power to control another or when a third party (or parties) controls or has the power to control both businesses. Please see this resource for more on these rules and how they can impact your business’s eligibility. 

When can I apply?

Lenders began accepting applications again as of Monday, April 27, 2020. The program is first come, first served, so businesses are encouraged to work with their local bank or credit union as soon as possible if interested. If you wish to begin preparing your application, you can download a copy of the PPP borrower application form to see the information that will be requested from you when you apply with a lender. 

What types of non-profits are eligible?

All 501(c)(3) non-profits with 500 employees or fewer, or more if SBA’s size standards for the non-profit allows. Please visit https://www.sba.gov/size-standards/ to find out your non-profit’s SBA size standards by number of employees. For example, churches and museums with fewer than 500 employees are eligible. You will need the 6-digit North American Industry Classification Code for your business. 

How is the loan size determined? 

Depending on your business’s situation, the loan size will be calculated in different ways (see below). The maximum loan size is always $10 million. In general, borrowers can calculate their aggregate payroll costs using data either from the previous 12 months or from calendar year 2019. For seasonal businesses, the applicant may use average monthly payroll for the period between February 15, 2019, or March 1, 2019, and June 30, 2019. An applicant that was not in business from February 15, 2019 to June 30, 2019 may use the average monthly payroll costs for the period January 1, 2020 through February 29, 2020. Borrowers may use their average employment over the same time periods to determine their number of employees, for the purposes of applying an employee-based size standard. Alternatively, borrowers may elect to use SBA’s usual calculation: the average number of employees per pay period in the 12 completed calendar months prior to the date of the loan application (or the average number of employees for each of the pay periods that the business has been operational, if it has not been operational for 12 months). For example:

  • If you were in business February 15, 2019 – June 30, 2019: Your max loan is equal to 250 percent of your average monthly payroll costs during that time period. If your business employs seasonal workers, you can opt to choose March 1, 2019 as your time period start date.
  • If you were not in business between February 15, 2019 – June 30, 2019: Your max loan is equal to 250 percent of your average monthly payroll costs between January 1, 2020 and February 29, 2020.
  • If you receive an Economic Injury Disaster Loan (EIDL) between February 15, 2020 and June 30, 2020 and you want to refinance that loan into a PPP loan, you would add the outstanding loan amount to the payroll sum.

What costs are eligible for payroll?

  • Compensation (salary, wage, commission, or similar compensation, payment of cash tip or equivalent)
  • Payment for vacation, parental, family, medical, or sick leave 
  • Allowance for dismissal or separation
  • Payment required for the provisions of group health care benefits, including insurance premiums 
  • Payment of any retirement benefit 
  • Payment of State or local tax assessed on the compensation of employees

What costs are not eligible for payroll?

  • Employee/owner compensation over $100,000
  • Taxes imposed or withheld under chapters 21, 22, and 24 of the IRS code
  • Compensation of employees whose principal place of residence is outside of the U.S
  • Qualified sick and family leave for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act

What are allowable uses of loan proceeds?

  • Payroll costs (as noted above)
  • Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums
  • Employee salaries, commissions, or similar compensations (see exclusions above)
  • Payments of interest on any mortgage obligation (which shall not include any prepayment of or payment of principal on a mortgage obligation)
  • Rent (including rent under a lease agreement)
  • Utilities
  • Interest on any other debt obligations that were incurred before the covered period

What are the loan term, interest rate, and fees?

The maximum term is 5 years (for loans approved by SBA on or after June 5, 2020, based on the date SBA assigns a loan number) with a maximum interest rate of 1 percent. First payment is deferred to the date that SBA remits the borrower's loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period), 100% guarantee by SBA, no collateral, no personal guarantees. No borrower or lender fees payable to SBA.  

How is the forgiveness amount calculated? 

Forgiveness on a covered loan is equal to the sum of the following payroll costs incurred during the covered 24-week period (or through December 31, 2020, whichever comes first) compared to the previous year or time period, proportionate to maintaining employees and wages (excluding compensation over $100,000):

Payroll costs plus any payment of interest on any covered mortgage obligation (not including any prepayment or payment of principal on a covered mortgage obligation) plus any payment on any covered rent obligation plus and any covered utility payment. 

How do I get forgiveness on my PPP loan?

You must complete a loan forgiveness application and apply through your lender for forgiveness on your loan. In this application, you must include:

  • Documentation verifying the number of employees on payroll and pay rates, including IRS payroll tax filings and State income, payroll and unemployment insurance filings
  • Documentation verifying payments on covered mortgage obligations, lease obligations, and utilities
  • Certification from a representative of your business or organization that is authorized to certify that the documentation provided is true and that the amount that is being forgiven was used in accordance with the program’s guidelines for use

The loan forgiveness application form and instructions include several measures to reduce compliance burdens and simplify the process for borrowers, including:

  • Options for borrowers to calculate payroll costs using an “alternative payroll covered period” that aligns with borrowers’ regular payroll cycles
  • Flexibility to include eligible payroll and non-payroll expenses paid or incurred during the 24-week period (or through December 31, 2020, whichever comes first) after receiving their PPP loan
  • Step-by-step instructions on how to perform the calculations required by the CARES Act to confirm eligibility for loan forgiveness
  • Borrower-friendly implementation of statutory exemptions from loan forgiveness reduction based on rehiring by December 31, 2020
  • Addition of a new exemption from the loan forgiveness reduction for borrowers who have made a good-faith, written offer to rehire workers that was declined

Download the Loan Forgiveness Application Form and Instructions

What happens after the forgiveness period?

Any loan amounts not forgiven at the end of one year is carried forward as an ongoing loan with max terms of 5 years (for loans approved by SBA on or after June 5, 2020, based on the date SBA assigns a loan number), at 1% max interest. Principal and interest will continue to be deferred to the date that SBA remits the borrower's loan forgiveness amount to the lender (or, if the borrower does not apply for loan forgiveness, 10 months after the end of the borrower’s loan forgiveness covered period). The clock does not start again.

Can I get more than one PPP loan?

No, an entity is limited to one PPP loan. Each loan will be registered under a Taxpayer Identification Number at SBA to prevent multiple loans to the same entity. 

What kind of lender can I get a PPP loan from?

All current SBA 7(a) lenders, including these lenders in Vermont, are eligible lenders for PPP. The Department of Treasury will also be in charge of authorizing new lenders, including nonbank lenders, to help meet the needs of small business owners.

How does the PPP loan coordinate with SBA’s existing loans?

Borrowers may apply for PPP loans and other SBA financial assistance, including Economic Injury Disaster Loans (EIDLs), 7(a) loans, 504 loans, and microloans, and also receive investment capital from Small Business Investment Corporations (SBICs).

How does the PPP loan work with the temporary Economic Injury Disaster Loan Emergency Advance and the Small Business Debt Relief program?

Economic Injury Disaster Loan Emergency Advance recipients and those who receive loan payment relief through the Small Business Debt Relief Program may apply for and take out a PPP loan. Refer to those sections for more information. 

Where can I find additional information on the Paycheck Protection Program?

The SBA, in consultation with the Department of the Treasury, has provided additional guidance to address borrower and lender questions concerning the implementation of the Paycheck Protection Program (PPP). Please refer to Paycheck Protection Program Loans Frequently Asked Questions (FAQs).  

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