The Coronavirus Aid, Relief and Economic Security (CARES) Act expands the Small Business Administration’s (SBA) 7(a) loan program to include nearly $350 billion for a small business program called the Payroll Protection Program.

The Payroll Protection Program (PPP) is not provided through SBA directly, so the first step to qualifying for a loan through the Payroll Protection Program is to find an SBA approved lender in your community. If your bank is not an SBA lender, you can contact the SBA at 1-877-475-2435 to find one; or visit the SBA website section on the 7(a) loan program. If you have trouble getting through to the national SBA office, this link will take you to your district office.

Who is eligible?

  • Small and medium sized businesses with fewer than 500 employees;
  • Nonprofits with fewer than 500 employees;
  • 501(c)(3) organizations (this is a tax-exempt designation conferred by the IRS based on the operations of the organization);
  • Sole proprietors;
  • Self-employed individuals; and
  • Independent contractors who typically receive 1099s.

How soon will the Payroll Protection Program be disbursing loans?
Secretary Steve Mnuchin said: “Treasury and the Small Business Administration expect to have this program up and running by April 3 so that businesses can go to a participating SBA 7(a) lender, bank, or credit union, apply for a loan, and be approved on the same day.”

What are allowable uses for Payroll Protection Program loans?

  • Payroll costs;
  • Certain costs related to the continuation of group health care benefits;
  • Employee salaries (including commissions);
  • Mortgage, rent and utilities payments; and
  • Interest on any other debt obligations that were incurred before the covered period.

Can Payroll Protection Program loans be turned essentially into grants?

Yes. A loan recipient may be eligible for forgiveness on a covered loan used for costs including up to eight weeks of payroll, mortgage and rent obligations, and utility payments. But there are specific requirements:

  • Every dollar a company spends on payroll, utilities, rent, or interest on mortgage debt during the eight-week covered period will be added together. That amount will be forgiven, up to the total amount your company borrowed through the program.
  • In order to ensure the loan amount will be forgiven, employers may not lay off any employees during the first eight weeks after they receive the loan.
  • Companies that reduce the salaries of workers who make less than $100,000 per year during this eight-week period by more than 25% will also have the forgivable amount of their loan reduced.

What’s the interest rate on Payroll Protection Program loans?

The maximum interest rate is 4%, but rates are reportedly much lower.

What size business loan do you qualify for?

  • The CARES Act allows businesses to take out loans equal to 2.5 times their average monthly payroll from 2019 with the total capped at $10 million. Payroll figures include salary and wages, health care benefits and paid sick leave.

How do I apply for a Payroll Protection Program loan?

  • This program is not provided through SBA directly, so the first step to qualifying for a 7(a) loan is to find an SBA approved lender in your community. Your lender can guide you through the application process and determine which 7(a) loan product will work best for your business.
  • For questions on finding a local SBA lender, contact your district SBA office, which can be found here. You can also contact the national SBA office at 1-877-475-2435 or email If you are having trouble getting through to, or getting your questions answered by, the SBA, please submit this form, and NAHB staff will follow up and provide additional guidance as needed.

Read the entire PPP Interim Final Rule issued by SBA here (.pdf)

Source: National Association of Home Builders (NAHB).

Disclaimer: NAHB is providing this information for general information only. This information does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind nor should it be construed as such.