FAQs: Paycheck Protection Program (PPP)

What is the Paycheck Protection Program (PPP)?

The Paycheck Protection Program is a loan program that originated from the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted in March 2020. This is a nearly $350-billion program, with loans backed by the U.S. Small Business Administration (SBA). The first round of PPP funding, totaling $349 billion, expired earlier this month, after just 13 days. A second round of funding totaling $310 billion has been authorized.

What do the loans cover?

PPP loans are intended to provide small businesses with eight weeks of cash flow starting from the loan origination date (if the obligations began before February 15, 2020). At least 75% of the PPP loan is supposed to be used to fund payroll and employee benefits costs. The remaining 25% can be spent on mortgage interest payments, rent and lease payments, and utilities.

What are PPP loan terms?

There are no fees and no collateral or personal guarantees required. There is no need to make loan payments for the first six months. The loan can be forgiven and essentially turned into a non-taxable grant.

Who qualifies for a PPP?

All small businesses are eligible. Required forms differ depending on the type of business.

How much funding can I receive?

The maximum amount you can receive from your SBA-approved lender is your monthly average payroll cost in 2019, multiplied by 2.5, up to a maximum of $10 million.

How do I apply?

You can apply through any certified PPP lender. DreamSpring is certified to accept PPP loans and is actively accepting applications at its website, www.DreamSpring.org.

Can a business apply to multiple lenders, and is there a penalty for doing so?

Yes, you can apply with more than one lender. No, there is no penalty. However, only one lender can reserve funds in the SBA’s E-Tran system per business Federal Employer Identification Number (EIN). This prevents double funding of the same business.

What is the deadline to apply?

Loans will be disbursed on a first-come, first-served basis, so you are advised to apply immediately.

How many dollars in PPP loans have been disbursed by DreamSpring, and how many jobs have been supported by those loans?

With the first round of PPP funding that expired April 15, DreamSpring disbursed 52 loans for $2.45 million representing 503 jobs with an average of 9.7 jobs per loan and an average loan size of $49,000. About 54 percent of the loans were to current clients of DreamSpring, and 46 percent were to new clients.

How can I spend my PPP loan funds?

Borrower will use the loan proceeds for the purposes stated in loan authorization as specified;$(Loan Amount) for Payroll Costs and Payments on Mortgage Interest, Rent, Utilities and Interest onOther Debt Obligations. At least 75% of this amount should be used for Payroll Costs if you want the loan forgiven.

Will my loan be deferred?

Yes – there are no payments due on this loan for 6 months following date of first disbursement. nterest will continue to accrue during the deferment period.

Will my loan be forgiven?

Borrower may apply to Lender for forgiveness of the amount due on this loan in an amount equal to the sum of the following costs incurred by Borrower during the 8‐week period beginning on the date of first disbursement of this loan:

Payroll costs
Any payment of interest on a covered mortgage obligation (this does not include any prepayment of OR payment of principal on a covered mortgage obligation)
Any payment on a covered rent obligation
Any covered utility payment

How will loan forgiveness be calculated?

The amount of loan forgiveness shall be calculated (and may be reduced) in accordance with the requirements of the Paycheck Protection Program. Not more than 25% of the amount forgiven can be attributable to non‐payroll costs. The Borrower’s request for loan forgiveness must include proof funds were used to cover approved cost.

Will I have to worry about a Balloon Payment?

No. The note must be fully amortizing with no balloon payment.

Should payments that an eligible borrower made to an independent contractor or sole proprietor be included in calculations of the eligible borrower’s payroll costs?

No. Any amounts that an eligible borrower has paid to an independent contractor or sole proprietor should be excluded from the eligible business’s payroll costs. However, an independent contractor or sole proprietor will itself be eligible for a loan under the PPP, if it satisfies the applicable requirements.

The amount of forgiveness of a PPP loan depends on the borrower’s payroll costs over an eight‐week period; when does that eight‐week period begin?

The eight‐week period begins on the date the lender makes the first disbursement of the PPP loan to the borrower. The lender must make the first disbursement of the loan no later than ten calendar days from the date of loan approval.

Am I expected to rehire, or maintain the same level of staff?

Yes ‐ the primary purpose of this loan is to make payroll for your business’ employees. You areexpected to maintain or rehire any staff members which were let go.

What type of documentation will be required for forgiveness?

The Borrower’s request for loan forgiveness must include the following:

Documentation verifying the number of full‐time equivalent employees on payroll and pay rates for the required periods, including payroll tax filings reported to the IRS and state income, payroll, and unemployment insurance filings.
Documentation, including cancelled checks, payment receipts, transcripts of accounts, or other documents verifying payments on covered mortgage obligations, payments on covered lease obligations, and covered utility payments.
Payments on a covered mortgage obligation, payments on a covered rent obligation or covered utility payments.
Any other documentation SBA determines necessary.