How to Apply for a Paycheck Protection Program Loan

Applying for a Paycheck Protection Program (PPP) loan is less daunting than applying for a traditional Small Business Administration (SBA) loan. Most lenders offer an online application process that allows you to upload your supporting documents simultaneously with the application.

Fit Small Business examined the Paycheck Protection Program loan application process at numerous lenders and brokers. We applied with Lendio and found its application process the most efficient. Lendio prompts you to upload the needed documents based on your business situation. It also prefills required fields and allows an online signature of the SBA 2483 form, unlike other lenders.

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1. Determine If Your Business Qualifies

• Entities: Small businesses, nonprofits, veterans organizations, tribal businesses, sole proprietors, self-employed individuals, and franchisees
• Number of employees: Fewer than 500
• SBA size standards: These vary, but a restaurant, for example, must have less than $8 million in annual revenue and a chain of convenience stores must have fewer than 500 employees
• Operational requirement: Operating as of Feb. 15, 2020
• Additional requirements: Must pay payroll taxes

The PPP loan is available to most types of small businesses. The only exception is businesses that were closed as of Feb. 15, 2020, for reasons unrelated to COVID-19. Large businesses also will be restricted from qualifying, with exceptions built-in for businesses in the accommodation and foodservices industry. However, the size standards offered by the SBA take into account industries that typically have large staffs.

2. Calculate How Much You Can Borrow

The SBA has produced some guidance that can help small business owners determine the potential loan amount for which a business may be eligible. We’ve included the calculations and built a calculator based on these numbers.

The calculations are determined by:

• Most small businesses: Multiply average total monthly payroll costs for a one-year period before the date of the loan by 2.5
• Seasonal small businesses: Calculate average total monthly payroll for a 12-week period from Feb. 15, 2019, to June 30, 2019, and multiply by 2.5
• Businesses formed after Feb. 15, 2019: Calculate monthly payments from Jan. 1, 2020, to Feb. 29, 2020, and multiply by 2.5
• Businesses refinancing loans: Small business owners also can refinance an outstanding loan made between Jan. 31, 2020, and the date upon which they receive a Paycheck Protection Program loan if the previous loan’s proceeds were used to cover a qualified expense

3. Gather the Required Documents

Compared to other types of SBA loans, the documentation requirements for PPP loans are minimal. While there may be some variation in the verification documents requested by different lenders, you can expect to provide documentation pertaining to the organization of your business and various documents to verify your payroll and other eligible expenses.

You can download a Paycheck Protection Program Loan Application Checklist to track your documents in preparation.

Borrower Documents

• Articles of incorporation/organization
• Bylaws or operating agreement
• Color copy of driver’s licenses for each owner of the business
• Copy of lease agreement (if applicable)

For Payroll Expense Verification

Most Businesses

• IRS Form 940 and 941 (contact your payroll processor or accountant for these forms)
• Payroll summary report or employee pay stubs, including payroll benefits like vacation, healthcare, and retirement, as of Feb. 15, 2020
• 1099s (if independent contractor)
• If any of your employees are paid more than $100,000 annually, you will need to provide 2019 payroll statements by employee with line-item detail on cash compensation like salary, wages, commissions or similar compensation

Seasonal Businesses

• Payroll summary for March 2019 to June 2019 including payroll benefits like vacation, healthcare, and retirement
• IRS Form 941 for quarter 2 2019 & Health and Retirement Benefit Detail
• IRS Form 941 for quarter 2 2018
• If any of your employees are paid more than $100,000 annually, you will need to provide 2019 payroll statements by employee with line-item detail on cash compensation like salary, wages, commissions or similar compensation

Businesses That Were Not Operational for a Full Year in 2019

Businesses that started operating on or before June 30, 2019:

• Payroll summary for all of the months the business was operating in 2019 including payroll benefits like vacation, healthcare, and retirement
• If any of your employees are paid more than $100,000 annually, you will need to provide 2019 payroll statements by employee with line-item detail on cash compensation like salary, wages, commissions or similar compensation

Businesses that started operating after June 30, 2019:

• Payroll summary for January 2020 through February 2020, including payroll benefits like vacation, healthcare, and retirement
• If any of your employees are paid more than $100,000 annually, you will need to provide 2019 payroll statements by employee with line-item detail on cash compensation like salary, wages, commissions or similar compensation

Independent Contractors

• 2019 1099-MISC
• 2019 1040 with Schedule C (optional)

Sole Proprietorships

• 2019 1040 with Schedule C

Additional Verification Documents

• Trailing 12-month business profit and loss (P&L) statement as of the date of your application
• Most recent business mortgage statement and/or rent/lease statement
• Most recent business utility bills like electric, gas, telephone, internet, or water

4. Find a Paycheck Protection Program Loan Provider

Banks, credit unions, loan brokers, and other financial institutions are authorized to offer an application for the Paycheck Protection Program loans. For most small business owners, an online provider is the best solution. However, there are certain circumstances when a different lender or financial institution would work better.

Top Paycheck Protection Program Loan Providers

While many banks offer this program, some are restricting it to borrowers who already have a business checking account with the bank. These banks are a good choice if your business has a complicated application process. We’ve identified more than 100 providers offering PPP loans, and listed their current lending status and restrictions.

Most small businesses should be able to apply for a PPP loan online. The advantage of online lenders is their ability to process applications quickly and their ability to access funding from multiple sources to ensure applications are funded.

5. Complete the Application

Most lenders allow you to apply for a Paycheck Protection Program loan online. These online applications ask basic questions about your business, such as name, address, and date the business became operational, as well as information about the business owners like date of birth and percentage of ownership interest. If you gathered the required documents prior to starting, you will have all of the information you need to complete the application. After completing your application, you will be asked to complete the formal SBA application (form 2483).

Complete SBA Form 2483

The SBA Form 2483 is the official application for the Paycheck Protection Program loan. This form includes basic borrower information, such as business name, address, and contact information, as well as your average monthly payroll expenses and number of employees. The bulk of the form consists of eight “yes or no” questions that verify your eligibility to receive federal funding under this program.

Depending on the lender you choose to work with, this form may be automatically populated based on your answers to the online application questions or may be sent to you to complete separately.

6. Provide Any Additional Information to the Lender

After completing the application and submitting it to your lender, you may be asked to provide additional information to verify or clarify the information you provided on the application. Given the limited available funding, it’s imperative that you respond to these requests as quickly as possible so that your application can be deemed complete. Incomplete applications cannot be submitted to the SBA for approval.

Bottom Line

Applications for this program are funded on a first-come, first-served basis. The first round of funding was fully expended within 14 days, and the second round of funding will likely be exhausted as quickly. To better your chances of receiving a PPP loan, you should complete an application as soon as possible.