What is an SPA PPP Loan?
Under the CARES Act, the Paycheck Protection Program (“PPP”) offered up to $10M in forgivable loans to small businesses. These short-term loans were built to keep employees on the payroll during the COVID-19 crisis.
How can I use the proceeds of a PPP loan?
You should use the proceeds from these loans on your:
- Payroll costs, including benefits
- Interest on mortgage obligations
What are the terms and rates of a PPP loan?
The PPP loan has a 1.00% fixed interest rate and is due in two years. All payments are deferred for six months, however, interest will continue to accrue over this period. In addition, no personal guarantees or collateral are required.
Can I apply for the PPP loans and the EIDL loans?
Yes, you can apply for both the PPP loans and the EIDL loans through the SBA—however, you must apply the funds to different expenses. In other words, no double-dipping.
Note: As part of your EIDL application, you can also request a $10K emergency grant. These funds do not need to be repaid, and you can qualify for a grant even if you do not qualify for an EIDL or PPP loan.
How do I qualify for 100% forgiveness under the PPP loan?
As long as you use your loans for qualified expenses (see above) over the 8-week period, you can qualify for 100% forgiveness. Your loan forgiveness may be reduced if:
- You decrease your full-time employee headcount
- You decrease salaries and wages by more than 25% for employees making less than $100K annually
If you restore employees or salary levels before June 30, 2020, you may still qualify for full forgiveness.
Are venture-backed companies or VCs eligible for PPP loans?
VCs with less than 300 employees may be ineligible for a loan if there are any investors with over 20% voting power. This presents issues with affiliation—meaning that affiliated companies in a larger portfolio would need to be counted together.
Are 1099 employees eligible for PPP funds?
1099 independent contractors may file for their own PPP loans, but can not be included in the payroll calculations of compensating companies.
If you are filing as a 1099, use your social security number in place of an EIN on your application.
The information shared here shall not be construed as accounting, financial, or legal advice. Divvy is not a Small Business Administration lender, nor your financial advisor. The information shared includes Divvy’s interpretation of the CARES Act and additional guidance provided by the Treasury and Small Business Administration, and you are encouraged to contact your accountants, financial advisors, and attorneys for accounting, financial, and legal advice.