Qualifying Payroll Costs: Allowed payroll costs are broadly defined and include compensation to employees, payment for leave time, health and retirement payments, and state and local taxes. For independent contractors or sole proprietors, it includes wages, commissions, income, or net earnings from self-employment or similar compensation. There are important exclusions, including compensation to employees living outside the USA, compensation of individual employees in excess of an annual salary of $100K, and some taxes.
Key Loan Terms:
- Maximum loan amount: the lesser of $10 million or average monthly payroll costs X 2.5 (or 3.5 if associated with a Food Services vendor in 2021)
- Interest rate: 1.0%
- Maturity date: 2 years (can be modified up to 5 years)
- First payment due date: after SBA pays off the forgiven amount, or 10 months after funding.
Loan Forgiveness: Depending on how the business uses the loan, PPP loans can be forgiven by the SBA in whole or in part. There are important restrictions the business must abide by in order to qualify for loan forgiveness, including keeping employees on payroll or quickly rehiring them within 24 weeks of receiving the loan and using the loan primarily for payroll (only 40% may be used for non-payroll eligible expenses).