SBA Loans


(Small Business Administration Paycheck Protection Program)

There has been a lot to talk about this loan program recently so I thought it was important to make sure you get the facts of it, including how it works, who qualifies for it and how you can apply.

The purpose of this loan is to help keep businesses afloat and their employees paid during the COVID-19 shutdown.


Benefits of this program are as follows:

  • Maximum loan amount is $10 Million.
  • The first 6 months there are no payments due but interest will accrue.
  • The term is 2 years with a 1% interest rate.
  • The loan is forgivable. (See details below.)

What Do You Need To Do To Qualify?

  • You are eligible if you are an employer with 500 or fewer employees whose primary residence is in the United States, or are a business that operates in a certain industry and meet the SBA employee-based size standards for that industry.
  • You must have been in operation on Feb 15, 2020 and either had employees to whom you paid salaries and payroll taxes or paid independent contractors as reported on a 1099-MISC form.
  • You are also eligible if you are a sole proprietor, an independent contractor or a self-employed individual and were in operation on Feb 15, 2020.
  • Tax-exempt nonprofit organizations qualify along with certain Tribal business concerns.

Who Is Ineligible

Even if you meet all the above requirements, there are some things that can make you ineligible for this program. Here is the list:

  • You are engaged in any activity that is illegal under federal, state, or local law;
  • You are a household employer (individuals who employ household employees such as nannies or housekeepers);
  • An owner of 20 percent or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony within the last five years; or
  • You, or any business owned or controlled by you or any of your owners, has ever obtained a direct or guaranteed loan from SBA or any other Federal agency that is currently delinquent or has defaulted within the last seven years and caused a loss to the government.

How Much Can You Borrow?

Here is how to calculate the amount you qualify for. Take your average monthly payroll expenses over the last 12 months. Multiply by 2 ½ and that gives you the maximum amount you could borrow. For example, average payroll is $10,000 per month. Multiply $10,000 by 2.5 and you get $25,000. That is the maximum you can borrow.

If you have employees who earn more than $100,000 per year, you would only count the first $100,000 in your calculation. I don’t want to get into the tiny details here but if you need help figuring out the numbers, I am available to help you.

Independent contractors and self-employed people will need to supply documentation necessary to establish eligibility, just like other business owners. This can include: payroll processor records, payroll tax filings, or Form 1099-MISC, or income and expenses from a sole proprietorship. For borrowers that do not have any such documentation, the borrower must provide other supporting documentation, such as bank records, sufficient to demonstrate the qualifying payroll amount.

Expenses That Qualify As Payroll Costs

To make sure we all know exactly what expenses qualify as payroll costs, these have been defined for us. They include:

Compensation to employees whose principal residence is in the US, including salaries, wages, commissions or similar compensation, cash tips or the equivalent, payments for vacation, sick leave, allowance for separation or dismissal, employee benefits (like health insurance, retirement, etc.) and payment of state and local taxes assessed on employees.

Note that it does not include federal taxes or taxes paid by employers. Payments to independent contractors are also not included in payroll costs because independent contractors can apply for this loan themselves.

What Can The Loan Be Used For?

Loan proceeds can be used for: payroll costs: continuation of health benefits like health insurance, medical leave, etc.; mortgage interest payments (not mortgage principal); rent payments; utilities; and interest payments on debts incurred before February 15, 2020.

These all must be business expenses so it doesn’t mean you can take the money and pay your personal bills with it.

How Is The Loan Forgiven?

The entire loan can be forgiven if all the loan proceeds are used for forgivable purposes listed above and employee and compensation levels are maintained (meaning if you reduce staff or payroll, the amount forgiven will be reduced).

Additional rules are that the funds must be spent within 8 weeks of the date of the loan and that at least 75% of the money must be used for payroll.

To find out if you qualify, how much you can borrow and how to apply, go to the contact page of our site and fill out the contact form or call us at 707-401-8080.

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