Flower shop business owner using her computer

How to Apply for the Paycheck Protection Program

5 min read • Apr 10, 2020 • Derek Miller

Since the government passed the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act), many small business owners have been looking into one of its largest provisions—the Paycheck Protection Program (PPP). 

The Paycheck Protection Program is an unprecedented move by Congress to keep companies and employees afloat during this pandemic. In fact, the government set aside $350 billion for small businesses to receive up to $10 million in financial aid through a PPP loan—which is fully forgiven if used correctly. 

If your small business is suffering as a result of the coronavirus outbreak, then you should consider applying for a Paycheck Protection Program (PPP) loan. We’ve outlined the steps below to help small business owners understand the PPP loan application better. 

Determine Whether You Qualify

Knowing whether you qualify for a PPP loan can save you the time and frustration of working through the process and getting denied.  

The Paycheck Protection Program was created to help all eligible small businesses—including nonprofits, sole proprietorships, independent contractors, and self-employed professionals. These SBA loans do not require personal guarantees or collateral, which increases the pool of eligible applicants.

The basic qualifications for a PPP loan are simple:

  • Must have 500 or fewer employees (some exceptions apply for industries like restaurants, hotels, etc.)
  • Must not have closed before February 15, 2020

There can be exceptions and more complex qualifications for nontraditional small businesses. For example, franchises with multiple locations can also apply, given their individual locations do not exceed 500 employees.

Sole proprietors and self-employed individuals such as Uber or Lyft drivers, freelancers, or other gig-economy workers can also qualify for PPP loans if they can prove the loan is essential for their operations.

Estimate Your Expected Needs

Calculating your loan amount is one of the trickier steps in the application process, so discussing your expected needs with your accountant or a local CPA is advisable. The PPP loan amount is 2.5 times your average monthly payroll costs. 

To calculate your average monthly payroll costs, you’ll need to look at an average over 2019 or January and February of this year—if your business recently opened. The average is based on expenses that the government considers relevant to payroll. 

Some of the costs that can be included in your estimate are:

  • Salaries and wages
  • Commission, cash tips, or similar
  • Medical or sick leave
  • Paid Time Off (PTO)
  • Health benefits and insurance premium payments
  • Retirement benefits

Build a Protection Plan for Repaying the Loan

While funds from a PPP loan can be fully forgiven if used within 8 weeks for payroll costs, mortgage interest, utilities, and rent—you should still have a plan in case yours isn’t.

If you’re unable to use the full amount within 8 weeks or use it for expenses not covered, you will not have your entire loan forgiven. Any amount of the PPP loan not forgiven is deferred for 6 months and has a low fixed interest rate. Borrowers must pay the full amount owed within 2 years. 

After you’ve estimated the desired loan amount and reviewed your books, take this opportunity to create a contingency plan. Determine a reasonable debt obligation for potential repayment and add it to your financial plan for the back half of the year. Hopefully, you won’t need to use it—but having a strategy in place will help your business moving forward. 

Review the Sample Application

The US Small Business Administration created a PPP sample application to guide small businesses through the process. Review the application and gather the information you need before you set out to apply. 

Along with basic information, like the type of business you own and business ID number, you will need to decide what the PPP loan is for and whether it is necessary. If you have additional information that could be useful for your application (or help defend it), like 1099 forms or copies of employee pay stubs, you may want to gather it to have on hand in case the SBA or IRS chooses to audit your company. While this is unlikely, it is better to be safe and prepared than sorry.  

Complete and Submit Your Application

Once you have completed the above steps, apply for a PPP loan through any existing SBA 7(a) lender (like a bank or other participating financial institution) or online lending marketplace. The application process should be straightforward if you have the information ready and the sample application complete. Because there is only $350 billion set aside for PPP loans, you need to apply as quickly as possible.

Lenders may begin processing the loan applications as early as April 3, 2020, for small businesses and sole proprietorships. If you’re an independent contractor or a self-employed professional, you can start applying on April 10, 2020. 

Your loan should take about a week or two to process and get approved, though there may be backlogs depending on the overall system rollout. 

Prepare for After the PPP Loan

The Paycheck Protection Program loan is a great way to keep your business moving forward over the next 8 weeks, but what happens after? Can you continue operating your business and paying employees if the effects extend beyond 8 weeks?

If you suspect your business will feel the effects of COVID-19 for more than the PPP loan covers, you might want to consider additional financial aid in the form of a short term loan or business line of credit

Business owners and their supporting communities are doing all they can to contain the spread of COVID-19. Everyone wants to protect their loved ones and take steps for life to get back to normal. The Paycheck Protection Program is a lifeline that can help you keep your staff employed and your business open now and moving beyond the pandemic.


Derek Miller

Derek Miller is the CMO of Smack Apparel, the content guru at Great.com, the co-founder of Lofty Llama, and a marketing consultant for small businesses. He specializes in entrepreneurship, small business, and digital marketing, and his work has been featured in sites like Entrepreneur, GoDaddy, Score.org, and StartupCamp.