The Paycheck Protection Program (PPP) is a federal loan program designed to help smaller employers impacted by the COVID-19 pandemic. It is administered by the Small Business Administration (SBA) and is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. 

The PPP has distributed hundreds of billions of dollars in loans to help American companies remain in operation during the pandemic. As part of the program, borrowers can be eligible for full loan forgiveness if the funds are used on certain payroll costs, business mortgage interest payments, rent, and other criteria.

In December 2020, the passage of a new coronavirus stimulus package—dubbed the Consolidated Appropriations Act, 2021 (CAA)—meant a new round of funding for PPP loans. However, Congress made several key changes to PPP loans to ensure it helps small- and mid-sized businesses when they need it most. 

The SBA’s Lender Match tool helps potential borrowers find SBA-approved lenders.

The following organizations may be eligible for first-draw PPP loan assistance: 

• Sole proprietors, independent contractors, and self-employed persons;
• Any small business concern that meets SBA’s size standards (either the industry size standard or the alternative size standard);
• Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:
  • 500 employees, or
  • That meets the SBA industry size standard if more than 500; and
• Any business with a NAICS code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location.

The following organizations may be eligible for second-draw PPP loan assistance: 

• Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses;
• Has no more than 300 employees; and
• Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.

According to the SBA, first- and second-draw borrowers may be eligible for loan forgiveness if they meet certain criteria. 

For first-draw borrowers, PPP loans may be forgiven if, during the covered period following loan disbursement: 

• Employee and compensation levels are maintained;
• The loan proceeds are spent on payroll costs and other eligible expenses; and
• At least 60% of the proceeds are spent on payroll costs.

For second-draw borrowers, full loan forgiveness may be granted if, during the covered period following loan disbursement: 

• Employee and compensation levels are maintained in the same manner as required for the First Draw PPP loan;
• The loan proceeds are spent on payroll costs and other eligible expenses; and
• At least 60 percent of the proceeds are spent on payroll costs.

Refer to the following resource for more information on PPP loan forgiveness.

According to the SBA, borrowers can apply for loan forgiveness as soon as they’ve used all of the loan proceeds for which they’re asking forgiveness. This must be requested within 10 months after the final day of the loan covered period; if not, the loan payments are no longer deferred and must be paid to the lender in installments. 

To apply for PPP loan forgiveness, borrowers must complete the following steps: 

1. Contact the PPP Lender and Complete the Appropriate Form
2. Compile All Relevant Documentation
3. Submit the Forgiveness Form and Documentation
4. Work with PPP Lender to Ensure Loan is Being Reviewed

Refer to the following resource for more information on PPP loan forgiveness applications.

Related Terms: Families First Coronavirus Response Act (FFCRA), CARES Act