What Is the SBA Paycheck Protection Program (PPP) and How to Apply?


Updated 01/11/21

Please note: In January 2021, as part of the $900 billion COVID-19 relief bill, Congress has authorized $284 billion for the Paycheck Protection Program(PPP). The U.S. Small Business Administration and Treasury issued new guidance on a new round of Paycheck Protection Program (PPP) funding.

On January 11th, the Paycheck Protection Program will reopen for new borrowers and certain existing borrowers. To promote access to capital, initially only community financial institutions will be able to make First Draw PPP Loans on Monday, January 11th, and Second Draw PPP Loans on Wednesday, January 13th.  The PPP will open to all participating lenders shortly thereafter. The new round of PPP funding starting in January 2021 will aim to fund more of the underserved business owners, women-owners, veterans, and minority-owned businesses. Full guidance on this can be read here.

We outline some of the areas where small businesses can receive assistance with a focus on the Paycheck Protection Program Loans.

Paycheck Protection Program (PPP) Loans

Under the stimulus package, the PPP is available to small and medium businesses with less than 500 employees via the U.S. Small Business Administration (SBA). The SBA is administering a Paycheck Protection Program loan for businesses to help maintain their staff and payroll and cover related costs during the Coronavirus pandemic.

For first-draw PPP loans, the max PPP loan amount is 2.5 times average monthly payroll or up to $10 million. For businesses applying for their second PPP loan, the max loan amount is $2 million. For full details on the new round of PPP funding, please go to SBA PPP website.

The program provides cash-flow assistance through 100 percent federally guaranteed loans to employers who maintain their payroll during this emergency. The loans will be forgiven for employers who meet the PPP loan forgiveness rules. See full details on PPP loan forgiveness here.

Call your community financial institution, bank, or search online for SBA-approved lenders. You can also learn more about applying for an SBA loan directly on the SBA website. Below we provide answers to some of the most popular questions around the Paycheck Protection Program.


FAQ on the Paycheck Protection Program:

Q. When can I apply and is there a deadline for the Paycheck Protection Program Loan (PPP)?

In January 2021, a new round of PPP loan funding was introduced. For full information on when your business can apply for the new round of PPP loan funding, go to the new guidance on PPP loan program.


Q. Where Can I apply for a Paycheck Protection Program Loan (PPP)?

You can apply through any existing SBA-approved lender or through any federally insured depository institution (bank, credit union, etc.) and farm credit system institution that is participating.

You should consult with your local bank, credit union or lender as to whether it is participating in the program. There will be more regulated lenders available to make these loans once they are approved and enrolled in the program.

Find a Lender near you: PPP Lenders


Q. What are allowable uses of PPP loan proceeds?

  • Employee salaries, commissions, or similar compensations
  • Payments of interest on any mortgage obligation
  • Rent
  • Utilities
  • Operations expenditure, property damage costs, supplier costs, and worker protection expenditures (from Jan 2021)
  • Interest on any other debt obligations that were incurred before the covered period


Q. How is the loan amount calculated for my small business?

The loan size will be calculated based on 2.5x monthly average payroll. The maximum loan amount for first-draw PPP loans is $10 million.

For second-draw loans the maximum PPP loan amount is $2 million.


Q. What are the loan term, interest rate, and fees?

The term for this loan is 2-years, extendable to 5 years and there’s no pre-payment penalty. The interest rate is fixed at 1%. No collateral and no personal guarantee is required and loan payments will be deferred for 6 months (however; interest will continue to accrue over this period.)


Q. How do I qualify for Loan Forgiveness with the Paycheck Protection Program Loan (PPP)?

The PPP loan amounts will be forgiven as long as:

At 60% of the loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8 to 24 week period after the loan is made; and employee and compensation levels are maintained.


Q. Who is eligible for the Paycheck Protection Program Loan (PPP)?

For first-draw PPP loans, all businesses with 500 or fewer employees. This includes sole proprietorships, self-employed individuals and independent contractors. This includes a business that operates as a franchise.

For second-draw PPP loans, all business with 300 or fewer employees, have experienced a 25% drop in revenue in 2020, and have fully used their first PPP loan amount.


Q. Are Independent Contractors eligible for the Paycheck Protection Program?

Yes. Independent contractors, sole proprietors, self employed are eligible for the Paycheck Protection Program.


Q. How does the PPP loan coordinate with SBA’s existing loans?

Borrowers may apply for PPP loans and other SBA financial assistance, including Economic Injury Disaster Loans (EIDLs), 7(a) loans, 504 loans, and microloans, and also receive investment capital from Small Business Investment Corporations (SBICs). However, you cannot use your PPP loan for the same purpose as your other SBA loan(s). For example, if you use your PPP to cover payroll for the 8-week covered period, you cannot use a different SBA loan product for payroll for those same costs in that period, although you could use it for payroll outside of that time period or for different workers.


Other Resources

PPP loan details: PPP Fact Sheet

For additional support for Small Businesses during the Coronavirus Pandemic: https://www.nationalfunding.com/covid-19/

For more information on PPP, visit The SBA hotline to help answer questions 1-800-659-2955, 7 days a week from 7:00a.m. to 9:00p.m.



As of publish date, while the information provided in this article is intended to be accurate, it should not be considered legal advice. These programs are rapidly evolving and we cannot be held responsible for any errors or omissions. Please contact your local bank, SBA and U.S. Treasury websites for updated information. You should also consult with your tax, legal or financial advisor to make the right choice for your business. 



COVID-19 Relief for Small Business and Paycheck Protection Program (U.S. Small Business Administration)



2 comments on “What Is the SBA Paycheck Protection Program (PPP) and How to Apply?

  1. Lance Gore on

    Hi, I own a small business in Lexington SC and my business acct is with First Reliance. I have banked with them for yrs. My concern is their website says due to their size, they will only be able to approve a limited number of these PPP loans for their customers. It is still not up and running as of 4pm Tues, Apr 7th. It is not fair that my participation in this program is tied to the size and ability of my bank. They are an SBA lender by the way. I feel like if I don’t hit the “lottery” with them and get approved, I may miss out.

    I called my old bank BB@T as they are much larger and was willing to move my biz acct to them, but was told they cannot process PPP loans for new accounts. They said something about that was a rule by the SBA that you have to be an acct holder prior to Feb 2020 or something like that in order to apply. In other words, no new accts.

    Please provide guidance as to what recourse I have to use a different approved SBA lender if 1st Reliance is unable to handle my PPP loan and cannot open an acct with a new bank to process.

    Thank you

    • The Bottom Line Blog Team on

      Hi Lance,

      We are sorry for the confusion and frustration you are experiencing. Your situation is being echoed by many small business owners. The SBA website does have a link to find approved lenders near you. Hopefully this is helpful: https://www.sba.gov/paycheckprotection/find
      We wish you the best during this difficult time.

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