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The Paycheck Protection Program - SBA Loans With Forgiveness

Written by Complete Payroll

The Paycheck Protection Program - SBA Loans With Forgiveness - Complete Payroll

The CARES Act, recently signed into law by President Trump, establishes a new $349 billion Paycheck Protection Program designed to provide relief to small businesses being impacted by the COVID-19 pandemic. This article provides an overview of the program and instructions for small businesses who may want to apply.


The Paycheck Protection Program is the result of a public-private mobilization effort between the Small Business Administration and the United States Treasury. A total of $349 billion has been allocated to the program, which is a loan designed to incentivize small businesses to keep workers fully-employed on their payroll. The SBA will forgive loans if all employees are kept on the payroll for 8 weeks and the money is used for payroll, rent, mortgage interest or utilities. Currently, lenders can begin processing loan applications as soon as April 3, 2020 and the Paycheck Protection Program will be available through June 30, 2020.

Eligibility - Who Can Apply

Small businesses with fewer than 500 employees are eligible (including sole proprietorships, independent contractors and self-employed persons). Private non-profit organizations or 501(c)(19) veterans organizations affected by the COVID-19 pandemic are also eligible.

Businesses in certain industries with more than 500 employees may also apply if they meed the SBA's size standards for those industries. The table of small business size standards can be found here.

Small businesses in the hospitality and food industry with more than one location could also be eligible at the store and location level if the store employs less than 500 workers. This means each store location could be eligible.

Starting April 3, 202, small businesses and sole proprietorships can apply. Starting April 10, 2020, independent contractors and self-employed individuals can apply. Since there is a funding cap, eligible businesses are encouraged to apply as soon as possible.


How to Apply

Eligible businesses can apply through any existing SBA 7(a) lender or through any federally-insured depository institution, federally-insured credit union and Farm Credit System institution that is participating.

Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender to see if they're participating in the program. 

Lenders will start processing loan applications on April 3, 2020.

If you wish to begin preparing your application, you can download a sample form to see the information that will be requested from you. 

Loan Details and Forgiveness

Loan payments will be deferred for six months and no collateral or personal guarantees are required. Neither lenders or the government will charge small businesses any fees. The loan has a maturity of 2 years and an interest rate of 0.5%.

The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent and/or utilities. Due to the likely high subscription, at least 75% of the forgiven amount must have been used for payroll. Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.

Other Assistance

From the Small Business Administration:

In response to the Coronavirus (COVID-19) pandemic, small business owners in all U.S. states, Washington D.C., and territories are currently eligible to apply for disaster assistance.

Enhanced Debt Relief is also available in SBA’s other business loan programs to help small businesses overcome the challenges created by this health crisis.

For information on additional Lending options, please click here.

SBA provides local assistance via 68 district offices and a nationwide network of resource partners. To find resources near you, please click here


Download the Payroll Protection Program Fact Sheet here.

Download the Payroll Protection Program Borrower Information Sheet here.

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