How to Calculate Your PPP Loan Amount →

April 15, 2020

The Paycheck Protection Program provides SBA small business First and Second Draw loans that function similarly to grants and incentivize owners to keep workers employed. These loans are eligible for complete forgiveness if 60% of the loan goes toward payroll costs, with the remainder spent on mortgage interest payments, rent and lease payments, certain property damage, essential supplier costs, worker protections, and utilities. Read more on how the program works.

The amount you might receive through PPP

First Draw applicants can qualify for up to $10 million or 2.5x average monthly payroll costs, whichever amount is lower. To calculate your First Draw loan amount as a small business, you’ll need to use the step-by-step business loan calculator provided by the SBA.

Second Draw applicants can qualify for up to $2 million or 2.5x (3.5x for eligible Accommodation and Food services) average monthly payroll costs, whichever amount is lower. To calculate your Second Draw loan amount as a small business, you’ll need to use the step-by-step business loan calculator provided by the SBA.

How to calculate PPP payroll costs by business entity type

Eligible payroll costs for PPP include salary, wage, commission, or similar compensation. You can utilize your 941 form, 940 or 944 form, 1120-S form, 1040 – Schedule C form, or payroll documentation to determine your payroll costs.

DID YOU KNOW?

Documents used will depend on business entity type. See our support article for more information.

If you’re not sure which documents to gather, review the information below to determine the timeframe the documents will need to cover.

U.S. small businesses: The applicable period for an established small business is (1) calendar year 2019 or (2) calendar year 2020. If the entity is not self-employed, it may also use the prior 12 months
- First Draw, new small business: Businesses formed after Jun 30, 2019, that apply for First Draw may use one of the above methods, or Jan 1, 2020, through Feb 29, 2020 (2 months)
- Second Draw, new small business: Businesses not in operation for all of Feb 15, 2019, to Feb 15, 2020, should use all of the months in operation from 2019 through the end of 2020 to determine their average monthly payroll
Seasonal businesses: The applicable period for a seasonal business that only operates during certain parts of the year is any 12-week period (at the applicant’s discretion) between Feb 15, 2019, and Feb 15, 2020
Not an employer: The applicable period is a full 2019 calendar year unless you are a seasonal business or new business. Sole-proprietors report income on Schedule C (line 31). If you’ve filed Schedule C and 944 forms, add line 31 from Schedule C to lines 1 and 2 from the 944 form

Once you’ve calculated your average monthly payroll cost, multiply it by 2.5 (3.5 for Second Draw food and accommodation services); this number is the maximum loan amount, up to $10 million for First Draws and $2 million for Second Draws. If you’re referring to your annual payroll costs, divide the annual number by 12 to determine the monthly average payroll cost.

Considerations for PPP small business loans

After you have a general sense of how much loan you’ll qualify for and how to calculate your payroll costs, be sure to:

Collect the required documents for your PPP loan application
Remember you need to spend at least 60% of your loan funds on payroll expenses (and keep documentation of loan expenses to prepare for possible forgiveness)
Keep in mind that all PPP applicants, including self-employed, independent contractor, and sole proprietorship persons, are eligible to apply for SBA’s Paycheck Protection Program, as long as they were in operation on 2/15/2020

We understand this is a difficult time for everyone, and we’re committed to helping business owners with government emergency relief resources and clear steps.

Bluevine is an official direct non-bank lender for the government-backed SBA Paycheck Protection Program. Our entire PPP application process, including retrieving your loan number, is automated and online. Get started with a fast and secure online PPP loan application.

DISCLAIMER

This content is for educational purposes only and should not be construed as professional advice of any type, such as financial, legal, tax, or accounting advice. This content does not necessarily state or reflect the views of Bluevine or its partners. Please consult with an expert if you need specific advice for your business. For information about Bluevine products and services, please visit the Bluevine FAQ page.

Understanding the Paycheck Protection Program: How Does It Work? →

April 6, 2020

In late March 2020, the federal government approved a $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, the largest stimulus bill in U.S. history, to support entities affected by this pandemic and the suffering economy.

One of the bill’s measures that aids small businesses is the Paycheck Protection Program (PPP), available through Aug 8. This program will help businesses keep the lights on and workers employed.

Here’s everything you need to know.

About the Paycheck Protection Program

The Paycheck Protection Program (PPP) is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This $669 billion program provides eight weeks of cash flow assistance through 100% federally guaranteed loans to keep the small business workforce employed during the COVID-19 crisis. Eligible loans function as a non-taxable grant forgivable under certain circumstances. The latest government stimulus package commits $284.5B to PPP and allows for Second Draws and simplified loan forgiveness.

Key details

The SBA’s Paycheck Protection Program now offers two loan options for small businesses: a First Draw for businesses that haven’t yet received a PPP Loan, and a Second Draw for businesses that did not receive a prior PPP Loan
Loans are available up to 2.5x (3.5x for eligible Accommodation and Food services for Second Draw) average monthly payroll costs, with a 1% interest rate
Businesses can use funds on payroll costs, including employee salaries, insurance benefits, insurance premiums, mortgage interest payments, rent and lease payments, certain property damage, essential supplier costs, worker protections, and utility expenses
- Per SBA program rules, payroll costs must account for 60% of expenses to qualify for forgiveness
There are no payments for the first ten months
There are no additional SBA fees or need for collateral or personal guarantees

Who qualifies for the PPP?

The primary requirement for First Draw loans is that a business needs to have fewer than 500 employees who reside in the U.S. Here’s the breakdown of entities that qualify for a First Draw PPP loan:

S corporations, C corporations, and partnerships
Sole proprietors and single-member LLCs
Independent contractors
Restaurants, hotels, or businesses under “Accommodation and Food Services”
Nonprofit (501(c)(3) organizations
Veterans 501(c)(19) organizations
Tribal businesses meeting the SBA’s size standard
Housing co-ops with fewer than 300 employees
Certain broadcast and news organizations
Destination marketing organizations
- That generally don’t engage in lobbying
- With fewer than 300 employees

Second Draw eligibility differs from First Draw and requires businesses to meet additional criteria. Here are the main differences:

The business must have fewer than 300 employees
The business must demonstrate a 25% loss in revenue over a certain period
The business must have received the First Draw in compliance with eligibility requirements
The business must have used, or will use, its full First Draw amount (including any increases) on eligible expenses

The SBA applies detailed affiliation requirements that request a business aggregate all of its parent companies, affiliates, and subsidiaries to determine whether the business meets the small business size requirements and borrowing criteria. You can view the full list of affiliate rules for this program on the SBA site.

How much funding a business can receive

The PPP loan amount a business will qualify for depends on its monthly average payroll costs. Use the timeframe recommended below (based on the applicable entity type) to calculate monthly average payroll costs.

U.S. small businesses: The applicable period for an established small business is (1) calendar year 2019 or (2) calendar year 2020. If the entity is not self-employed, it may also use the prior 12 months
- First Draw, new small business: Businesses formed after Jun 30, 2019, that apply for First Draw may use one of the above methods, or Jan 1, 2020, through Feb 29, 2020 (2 months)
- Second Draw, new small business: Businesses not in operation for all of Feb 15, 2019, to Feb 15, 2020, should use all of the months in operation from 2019 through the end of 2020 to determine their average monthly payroll
Seasonal businesses: The applicable period for a seasonal business that only operates during certain parts of the year is any 12-week period (at the applicant’s discretion) between Feb 15, 2019, and Feb 15, 2020

Not an employer: The applicable period is a full 2019 calendar year unless you are a seasonal business or new business. Sole-proprietors report income on Schedule C (line 31). If you’ve filed Schedule C and 944 forms, add line 31 from Schedule C to lines 1 and 2 from the 944 form

Here’s how to calculate your PPP loan amount:

Take your average monthly payroll cost and multiply it by 2.5 (3.5 for Second Draw eligible food and accommodation services); this number is the maximum loan amount, up to $10 million for First Draw and $2 million for Second Draw. If referring to the annual payroll costs, divide the annual number by 12 to determine the monthly average payroll cost.

What you can use funds to cover

For loan forgiveness to occur, businesses have to use the funds on payroll costs, insurance premiums, mortgage interest payments, rent payments, and utility costs. The costs need to occur during an 8 to 24 week period after receiving the loan (while maintaining employee numbers and compensation levels).

It’s important to note that insurance premiums and mortgage interest payments must be incurred by Feb 15, 2020, for loan coverage eligibility. Similarly, rent lease agreements and utility services must be in place before Feb 15, 2020.

The SBA released a simplified forgiveness application. We’ll provide more information on the application (as well as the rules for loan forgiveness) when available.

Defining eligible and ineligible “payroll costs” for forgiveness

Payroll costs include:

Forgiveness eligible payroll costs

Compensation (salary, wage, commission, or similar; payment of cash tip or equivalent)

Payment for vacation, parental, family, medical, or sick leave

Allowance for dismissal or separation

Payment required for group health care benefits, including insurance premiums

Payment of any retirement benefit

Payment of state or local tax assessed on the compensation of employees

Non-eligible payroll costs

Employee/owner compensation over $100,000 (this is already removed and calculated in the Bluevine product)

Payments made to independent contractors

Federal employment taxes

Compensation of employees whose principal place of residence is outside of the U.S.

Qualified sick and family leave for which a credit is allowed under the Families First Coronavirus Response Act

BLUEVINE TIP

Keep a documented record of all of your expenses because you’ll need them when seeking SBA’s loan forgiveness through your lender.

What you need to know

*Bluevine and Researchscape’s latest survey of over 500 small business owners*

We understand this is a difficult time for everyone, and we’re committed to helping business owners with government emergency relief resources and clear steps.

DISCLAIMER

Paycheck Protection Program: What You Need to Apply →

April 6, 2020

The Paycheck Protection Program (PPP) is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Initially, this was a $350-billion program providing small businesses with eight weeks of cash-flow assistance through federally guaranteed loans that functioned similarly to a non-taxable grant. In December 2020, the government passed a stimulus package committing an additional $284.5B to PPP.

Because the PPP is available through Mar 31, 2021, and funds are limited, you’ll want to gather the right documents for the loan application right away. Here’s a checklist of what’s required:

PPP Loan Application Checklist

General Business Information Needed

Basic information about you and your business
Average monthly payroll costs
Details of full-time employees and associated payroll costs
Details of all persons with 20% or greater ownership stakes

Required documents based on First and Second Draw

First Draw Documents

Proof of payroll: You’ll need to submit payroll documents so we can determine your average monthly payroll costs. We recommend:

Quarterly 941 forms, yearly 940 or 944 forms, 1120 form, 1120-S form, 1065 form, Schedule C, or payroll documentation with a corresponding letter from the payroll processor

Bank statements: You will need to provide a bank statement that shows you were in operation on Feb 15, 2020.

Second Draw Documents

Proof of payroll: You’ll need to submit payroll documents so we can determine your average monthly payroll costs. We recommend:

Quarterly 941 forms, yearly 940 or 944 forms, 1120 form, 1120-S form, 1065 form, Schedule C, or payroll documentation with a corresponding letter from the payroll processor

Bank statements: You’ll need to provide a bank statement that shows you were in operation on Feb 15, 2020.

Loan note: If you received your First Draw PPP loan from a lender other than Bluevine, you’ll need to submit the loan note for your First Draw.

Revenue drop: For loan amounts of $150,000 or more, you will need to provide documentation that shows gross receipts for the appropriate time period.

We understand this is a difficult time for everyone, and we’re committed to helping business owners with government emergency relief resources and clear steps.

DISCLAIMER