Paycheck Protection Program

Paycheck Protection Program – What You Need to Know


The fact that payroll is likely going to be a small business’s highest controllable cost, we at MWM believe that discussing the Paycheck Protection Program (PPP) launched by the Small Business Administration (SBA) is an upmost priority! Thousands of small businesses throughout the United States are struggling to make ends meet due to COVID-19, and we want to give a detailed explanation of the PPP. 

What is PPP?

Established under the CARES Act (Coronavirus Aid, Relief, and Economic Stability Act), The PPP is a $349 Billion Loan program designed to provide funds to employers as an effort to keep their team on their payroll. It covers any eight week period between February 15th, 2020 and June 30th.

It covers mortgage interest, rent, or even utility expenses as well. 

Who can apply for a PPP loan?

You can apply if you are one of the following:

  • A small business with less than 500 employees, which includes being a restaurant franchise owner, or even a hotel who wants to cover payroll for EACH location they own, so long as each site has less than 500 employees. 
  • SBA approved independently owned franchises with less than 500 employees
  • Independent Contractor
  • Sole Proprietor
  • Tribal Business
  • Gig Economy Worker
  • Private Non-Profits
  • 501(c)(19) Veterans organizations 

How do I apply?

Submit this application to any institution that is a qualified SB 7(a) Lender or participating Federally Insured Bank, Credit Union, Farm Credit System member. Additional lenders may also qualify; however, note that the program will only be available until June 30th, 2020, or when funds are exhausted. The PPP is a first-come, first-serve program!

How much can I borrow?

The max you can borrow is 2.5X your business’s average monthly payroll during the one year before the date on which the loan is made, up to $10 Million. Which for most companies, they can use what this was for 2019.

The SBA had posted a few examples outlining the maximum borrowing amount, which we have provided below. Please keep in mind that your maximum borrowing amount will be affected if any of your employees made $100,000 or more annually. 


Example 1 – No employees make more than $100,000 annually: 

  • Annual payroll: $120,000 
  • Average monthly payroll: $10,000 
  • Multiply by 2.5 = $25,000 
  • Maximum loan amount is $25,000 

Example 2 – Some employees make more than $100,000 annually:

  • Annual payroll: $1,500,000 
  • Subtract compensation amounts in excess of an annual salary of $100,000: $1,200,000 
  • Average monthly qualifying payroll: $100,000 
  • Multiply by 2.5 = $250,000 
  • Maximum loan amount is $250,000

Example 3 – No employees make more than $100,000 and have outstanding Economic Injury Disaster Loan (EIDL) of $10,000. 

  • Annual payroll: $120,000 
  • Average monthly payroll: $10,000 
  • Multiply by 2.5 = $25,000 
  • Add EIDL loan of $10,000 = $35,000 
  • Maximum loan amount is $35,000

Example 4 – Some employees make more than $100,000 and have an outstanding EIDL loan of $10,000 

  • Annual payroll: $1,500,000 
  • Subtract compensation amounts in excess of an annual salary of $100,000: $1,200,000 
  • Average monthly qualifying payroll: $100,000 
  • Multiply by 2.5 = $250,000 
  • Add EIDL loan of $10,000 = $260,000 
  • Maximum loan amount is $260,000

If you have an EIDL and received an advance, you must subtract the advance amount as that does not have to be repaid. 

When does this loan mature and what is the interest rate?

The PPP is a 2-year loan with an interest rate of 1%. 

Anything else I should know?

Loan payments are deferred by six months, however, it is essential to note that interest will still accrue for those six months. Fortunately, the SBA understands how urgent businesses will need funds so they will not require collateral or personal guarantees and lenders nor the gov’t charge fees for the loan. The loan will be forgiven, as long as 75% of the forgiven amount is used for payroll. Note that remission will reduce if the full-time headcount lowered, or if salaries and wages decrease.


Wait! My loan will be forgiven!? That’s great, but when will that happen?

The loan will be forgiven after the eight week period after you borrow the funds, as long as you met all of the loan forgiveness guidelines. 

Any way I can prepare before submitting my application?

  • To start, contact your local bank to see if they participate in the PPP. 
  • Calculate your maximum loan amount.
  • Review the application beforehand to make sure what exactly you will need to prepare or have at the ready. Although we have provided a detailed summary of the loan, there are additional items to consider. Other conditions and requirements are found by reviewing the Interim Final Rule from the SBA. Knowing what you will have to provide to a lender beforehand can save a massive amount of headache and confusion. 

Most importantly, it is exceptionally wise to consult with your financial advisor to discuss the impact of this loan, along with weighing other alternatives. 

However, If you do not work with a Financial Advisor, MWM is giving away FREE, one-hour intensive sessions to any entrepreneurs or individuals that have been directly impacted by COVID-19. We will cover any topics that can be addressed in a one-hour time frame with guidance and direction on what steps you should take to reach your short or long-term financial goals. No obligation or hidden costs. We want to make sure you are in the best financial place in these uncertain times. Respond to this post or message us to schedule your FREE one-hour intensive.

Millennial Wealth Management

Millennial Wealth Management is a fee-only registered investment advisor in Colorado. We educate and advise millennials and their families in the Denver and Boulder area, as well as other states virtually. As millennials, we understand the financial choices our generation is faced with, from navigating your first home purchase or tackling student loans. Our mission is to help our generation stop worrying about money.

Copyright Millennial Wealth Management, 2020.