JFDI Accountants Loader

The Paycheck Protection Program: What Business Owners, Contractors and Self-Employed Workers Need to Know

April 16, 2020

Note: The Treasury Department, Small Business Administration and lenders continue to update and refine their procedures and administrative requirements. The information in this article is current to the best of our knowledge as of April 7th, 2020. However, details may change between the time this piece was written and the time you read this. We encourage all readers to visit the Small Business Association website at www.sba.gov to get the latest, most up-to-date information.

The Paycheck Protection Program (PPP) is an unprecedented Small Business Administration lending program designed to prevent or mitigate the effects of massive numbers of layoffs. It’s a forgivable loan of up to 2.5 times your average monthly payroll, and an interest rate of 1%. Amounts used to keep employees on the payroll or to pay rent, utilities and mortgage interest will be forgiven. So for most borrowers, some or all of that loan is going to turn into a grant.

If you’ve been deterred from applying for SBA assistance in the past, because of the long delays and endless paperwork required, don’t be deterred from the Payroll Protection Program. This one is different. If you’ve been affected by the coronavirus crisis, and you’re having trouble making payroll or even if you’ve already had to furlough or lay off workers, or you need to make a rent payment just to stay alive, you need to take a look at this program.

Use the proceeds primarily to make sure your employees are getting paid and keep the lights on at your business location (rent and utilities). If you use the money for these purposes, up to 100% of the loan can be forgiven.

Unlike almost every other federal program ever implemented, the Paycheck Protection Program is designed to be quick and dirty. You’ve heard of JFDI Accountants; This is JFDI lending. There’s no collateral or personal guarantee required. The application is just one page long, plus a signature page and an instructions page. You can fill it out in five minutes. Do that, round up your payroll documentation, and turn it in to any participating lender.

Note: The SBA itself does not lend money directly in the Paycheck Protection Program. To apply, you must go to an authorized Small Business Association lender.

Here are the details that small business owners need to know:

The basics

  • The PPP is a $349 billion program, administered by the Small Business Administration, via a large network of approved community lenders.
  • Created under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, (P.L. 116-136).
  • Designed to provide small businesses with up to eight weeks of cash to meet basic expenses.


  • SBA-backed loan with an interest rate of 1%;
  • Loan matures in two years.
  • Loans are capped at $10 million per business/applicant.
  • Payments can be deferred for up to six months.
  • Borrow up to 2½ times your monthly average payroll costs (based on most recent full 12 months). New and seasonal businesses see below for further details.

Loan Forgiveness

Paycheck Protection Program loans are forgivable under the following circumstances:

  • All employees must remain on the payroll for eight weeks (or be rehired if you have already furloughed them).
  • Loan proceeds are used for:
  • Payroll costs (except for compensation to any single employee in excess of $100,000 per year). To maximize the value of this benefit, you should strive to use at least 75% of the loan to pay payroll costs. SBA officials anticipate that not more than 25% of the forgiven balance may be for expense other than payroll costs.
  • Payroll costs include:
  • Salary;
  • Commissions;
  • Tips;
  • Certain employee benefits including sick leave and health care premiums;
  • Retirement benefits paid;
  • State and local taxes;
  • Additional wages paid to tipped employees;
  • Allowances for separation and termination;
  • Sick leave, medical leave or family medical leave compensation.
  • Rent;
  • Mortgage interest (not principal, and not prepayments);
  • Utilities.

To qualify for forgiveness, the rent or mortgage interest must have been incurred prior to February 15th, 2020.

Not more than 25% of the loan forgiveness amount may be attributable to non-payroll costs. So you can’t throw your employees overboard and expect to get to keep a bunch of free money. It doesn’t work like that. It’s designed to incentivize businesses to pay employees, so they can survive while they’re staying home.
The good news is, of course, those employees will be there for you when you ramp operations back up.

What to do if you’ve already laid off employees or slashed their pay prior to the PPP program

If you’ve already let employees go or reduced their compensation, it’s not too late to qualify for a Payroll Protection Program Loan, and you can still qualify for forgiveness for payroll expenses. To qualify, you must:

  • Rehire all your employees by June 30th, 2020;
  • Restore rates of pay if you reduced pay for anybody between February 15th and April 26th, 2020.

Your eligibility for loan forgiveness will be reduced or eliminated if:

  • You reduce the number of your full-time employees or full-time equivalents (FTEs);
  • You cut wages by 25% or more for any employee who earned less than $100,000;

Loan forgiveness isn’t automatic. You must request it from your lender. Be prepared to submit documentation for your payroll and other qualifying expenses. See the section below on how to apply.

How to claim Paycheck Protection Program loan forgiveness

Submit your request to your lender or loan servicer. You must include the following information:

  • Verification of the number of full-time equivalent employees and their pay rates;
  • Eligible lease payments;
  • Mortgage payments and interest;
  • Utility obligations.

You must certify that these documents are true, and that you used the forgiveness amount requested to make payroll and make your eligible interest, rent and utility payments.

The lender must make a decision within 60 days of receiving your application.

Who is eligible?

  • Businesses with fewer than 500 employees;
  • Sole proprietors;
  • Self-employed;
  • Independent contractors;
  • Gig economy workers;
  • Private non-profit organizations;
  • 501(c)(19) veterans’ organizations;
  • Tribal concerns;
  • Businesses in certain industries with more than 500 employees may be eligible, if they meet SBA size standard criteria for their NAICS code. To see if your business qualifies, use this SBA size standard tool.
  • Small businesses in the hospitality and food industry (NAICS code 72) with multiple locations could also be eligible if their individual locations employ fewer than 500 workers.
  • Faith-based organizations are eligible, if otherwise qualified. Click here for more information for faith-based organizations.

Self-Employed, independent contractors and gig economy workers

Independent contractors and self-employed individuals can start applying for the Paycheck Protection Program on April 10th, 2020.

Qualifying payroll costs for these individuals may include:

  • Commissions;
  • Income;
  • Net earnings from self-employment or similar compensation;

Limitations apply for those earning $100k or more. Email us at WeCare@JDFIAccountants.com for details.


The Paycheck Protection Program is optimized for speed and simplicity. Underwriting is highly streamlined:

  • No collateral required;
  • No personal guarantee;
  • No SBA fees;
  • No ‘credit elsewhere’ tests. You can qualify even if you have access to credit from other sources;

How much can I borrow?

Generally, you can borrow a maximum of 2.5 times your average monthly payroll costs (including tips, benefits, taxes, etc.) Most businesses should use their average monthly payroll over the last 12 months. For new businesses, you should base your application on your average payroll for January and February 2020.

You should include all employees in your application, whether full-time, part-time, seasonal, on-call, temporary or per diem.

Loans under the Paycheck Protection Program are capped at $10 million.

The SBA will use your 2019 tax records and payroll documents (most recent 12 months) to calculate your payroll costs, which drives the overall loan amount.

There are some special calculations that apply to seasonal businesses, and businesses that were not in operation between February 15th and June 30th, 2019.

To calculate the amount your business is eligible to receive under the PPP, use one of these calculators:

How to apply

Unlike the Economic Impact Disaster Loan Program, which is administered directly by the Small Business Administration, the Payroll Protection Program is administered by a network of SBA-approved banks and other lenders throughout the country. You can apply via any participating SBA-approved lender you choose.

Click here to download a PDF of the application.

Required documents

Be prepared to submit the following documents in support of your Payroll Protection Plan application:

  • IRS Forms 941 for quarters ending 6/30/19, 9/30/19 and 12/31/19, 3/31/20, OR;
  • IRS Form 940 for the year ended 12/31/19 OR;
  • A copy of your payroll reports:
  • Summary report for the most recent 12 months (gross wages prior to Section 125 or Deductions);
  • Report detailing each employee and their gross pay for the most recent 12 months (totals should agree with summary report);
  • Report detailing vacation, severance pay, group health benefits, retirement benefits, etc. AND;
  • IRS Forms W-2, W-3 for 2019 (REQUIRED)
  • Supporting documentation for health, dental, and retirement benefits paid for most recent 12 months, along with a schedule describing each of these costs by category
  • Copies of state unemployment tax filings for 2019.

Availability: You can apply through June 30th, 2020. However, funding for the Payroll Protection Program is capped. The sooner you apply, the more likely it is that you will be able to get funded.

Coordination with Other Programs

You cannot ‘double dip,’ using an Economic Injury Disaster Loan (EIDL) and a Payroll Protection Program loan for the same thing. You can use them both to fund payroll expenses, but they must be used to pay employees for different periods, for example.

If you took out an Economic Injury Disaster Loan (EIDL) between Feb. 15 and June 30, 2020, and used the proceeds for payroll, you are required to use any funds received to refinance that loan into a Payroll Protection Plan loan.  

If you receive an emergency grant of $10,000 under the EIDL program, that amount will be subtracted from any PPP loan forgiveness.

Need help?

JFDI Accountants is ready to help you navigate the requirements of applying for Small Business Administration relief.

You can email us at WeCare@JFDIAccountants.com for more information.