The Paycheck Protection Program helps small businesses with payroll and operating costs. Learn how PPP works.
Updated May 27, 2021 · 4 min read Written by Elizabeth Renter Senior Economist Elizabeth Renter
Senior Economist | Economics, Data analysis, Personal finance
As NerdWallet’s Senior Economist, Elizabeth Renter spends her time analyzing economic trends and data to help people make more informed decisions about their personal finances. Her work has been cited by The New York Times, The Washington Post, the "Today" show, CNBC and elsewhere. Prior to joining NerdWallet in 2014, she was a freelance journalist. She received a Masters of Science in Finance and Economics from West Texas A&M University, and focused her elective coursework on macroeconomics and analytics. When she’s not at work, Elizabeth enjoys college football, old houses, traveling to old cities and powerlifting. She is based in Durham, North Carolina.
Assigning Editor Sally Lauckner
Assigning Editor | Small business
Sally Lauckner is an editor on NerdWallet's small-business team. She has over 15 years of experience in print and online journalism. Before joining NerdWallet in 2020, Sally was the editorial director at Fundera, where she built and led a team focused on small-business content and specializing in business financing. Her prior experience includes two years as a senior editor at SmartAsset, where she edited a wide range of personal finance content, and five years at the AOL Huffington Post Media Group, where she held a variety of editorial roles. She is based in New York City.
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Updated 5/27/21: The Paycheck Protection Program officially ends on May 31, 2021. While lenders have until June 30 to finish processing approved loans, new PPP loan applications will not be accepted after the program expires.
Congress extended the PPP deadline on March 25, giving small-business owners until May 31 to apply for a first- or second-draw loan through the Paycheck Protection Program. But the Small Business Administration stopped accepting most new applications on May 4 when the general fund for PPP loans ran out of money.
Community financial institutions were still able to process new applications thanks to funding set aside for these lenders, which service underserved communities.
Here is what we know about the latest round of PPP.
We’ll start with a brief questionnaire to better understand the unique needs of your business.
Once we uncover your personalized matches, our team will consult you on the process moving forward.
First-time loans can go to a wider array of borrowers, provided they were in business on Feb. 15, 2020. Eligibility will now include news outlets with no more than 500 employees per location. In addition, 501(c)(6) nonprofits and destination marketing organizations may be eligible if they meet limits on lobbying and size.
Sole proprietors, self-employed workers and independent contractors or side gig workers are also eligible.
Publicly traded companies are excluded from the latest PPP round.
Some funding is now set aside to help specific struggling groups:
Grants to live entertainment venues and organizations, museums and movies theaters that demonstrate a 25% reduction in revenues. Grant recipients cannot also get a PPP loan.
Loans made through community financial institutions and some small depository institutions.Money for borrowers with 10 or fewer employees and to provide loans under $250,000 in low-income areas.
Changes announced on Feb. 22, 2021 remove additional restrictions, so business owners with delinquent federal student loans or non-fraud felony convictions are now eligible for PPP loans.
The new authorization provides funding for a second PPP loan for eligible businesses.
Second loans can go to previous borrowers if they have no more than 300 employees and can show a 25% drop in gross receipts in any 2020 quarter compared to the same quarter in 2019.
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First-time loans continue to be capped at 2.5 times average monthly payroll costs, with a maximum of $10 million.
Second PPP loans have a $2 million maximum and generally use the 2.5 times average monthly payroll guideline. But the hard-hit accommodation and food service industries can borrow up to 3.5 times average monthly payroll costs.
On Feb. 22, 2021, the Biden administration announced changes to the loan calculation formula for self-employed professionals, many of whom only qualified for a small amount or were excluded entirely from previous rounds. The new formula uses gross income instead of net profit.
But the SBA didn’t start accepting applications using the new formula until March 5. Since there was no directive to make the changes retroactive, borrowers who received a PPP loan before that date are stuck with a much lower loan amount and no recourse to change it.
For all loans, allowable expenses have been expanded to include operations items like software; supplier costs; protective equipment and workplace modifications to meet health guidelines; and damage due to 2020 public disturbances that's not covered by insurance.
The bill clarifies that group insurance benefits provided by an employer are considered payroll costs, including group life, disability, vision, or dental insurance.
PPP loans continue to cover payroll and operating costs such as rent and utilities.
The loans are being offered at a 1% fixed rate interest. You aren’t required to put up collateral for the loans, and there are no application fees.
Business owners need to fill out a PPP loan application — SBA Form 2483 for first-draw loans and SBA Form 2483-SD for second-draw loans — and gather all supporting documents.
You can apply for a new PPP loan through any participating lender. Keep in mind: Some banks prioritize current account holders, so if you have a relationship with a bank offering PPP loans, apply there first. The deadline to apply is March 31, 2021
A few fintech companies and online lenders, such as Bluevine , are approved to accept PPP loan applications. These companies typically offer a streamlined loan application process and may be able to approve loans and deliver funding more quickly than traditional banks.
The new PPP authorization creates a simplified forgiveness process for borrowers who received loans less than $150,000.
PPP funds used on payroll costs, rent, utilities and mortgage interest in the 8 to 24 weeks after receiving the loan are forgivable. This means you won’t be required to repay that portion of the loan. But you must have spent at least 60% on payroll costs and no more than 40% on nonpayroll costs in order to receive full forgiveness.
The Paycheck Protection Program was created on March 27, 2020, as part of the Coronavirus Aid, Relief, and Economic Security Act, also known as CARES, to help small businesses keep employees on the payroll. The program's primary tool is forgivable loans intended to make paying employees easier during the economic fallout of the coronavirus pandemic .
The SBA guarantees PPP loans, while banks and other financial institutions underwrite and issue them.
The first PPP round opened on April 3 but the $349 billion in initial funding was depleted in weeks. An additional $310 billion in funding was signed into law in late April, and applications closed on Aug. 8.
The bill extends payment of principal and interest on loans guaranteed by the SBA as part of the 7(a), 504 and microloan programs.
The bill also increases the guarantee to 90% for the SBA’s signature 7(a) loans until Oct. 1, 2021.
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