13 min read
CARES: SBA Paycheck Protection Loans
parachute dropping money on COVID-19

🚨Uncertain times advisory: This page contains everything (I think) I know about the paycheck protection program loan, as of late evening April 2. The path from bill passage to loan application is a fluid situation, with implementation details in active development between the SBA and lending institutions. I will post further updates as more information becomes available.

  • Updated 4/2, 1:30pm for more information regarding VC eligibility and affiliate rules
  • Updated 4/2, 5:30pm on the 💩 storm brewing around the application launch
  • Updated 4/2, 10:00pm on final treasury guidelines
  • Updated 4/3, 8:55am on false start for many banks
  • Updated 4/3 1:08pm on BofA participation
  • Updated 4/3 5:30pm on local lender approach
  • Updated 4/4 1:10pm on possible personal success
  • Updated 4/15 7:44pm on loan confirmation and state of funding

The CARES Act was signed into law on March 27th, providing a much needed wave of stimulus for individuals and businesses. A key provision of this act is the Paycheck Protection Program (PPP), which will provide $349 billion worth of debt forgivable loans to small businesses impacted by the Coronavirus (COVID-19) crisis. In exchange for the forgiveness, businesses will be required to maintain staffing and payroll at 75% during the covered window. The goal is to help struggling businesses retain workers, maintain payroll, and cover rent/mortgage/utility expenses.

Where do things stand?

The law was passed and signed, but the program hasn’t yet been implemented and the program has been implemented, but good luck finding an application.

The Treasury Dept announced earlier this week that lenders can begin taking applications Friday, April 3, 2020 (for small businesses and sole proprietorships). Independent contractors and self-employed individuals can begin applying April 10.

🚨Update 4/15 7:44PM:

Finally. Confirmation that funds are possible from big banks. Funds cleared 48 hours after finally hearing from a PNC loan officer.

Smaller banks I’ve spoken to that were taking on new customers aren’t any longer. Some claim they’re constrained by the SBA to submitting only 1 or 2 applications per day.

The EIDL grant funds appear to have dried up, but recent correspondence from the SBA hints at hope.

Fintech companies including Intuit, Paypal, Square, and Lendio are now participating.  I was able to help another company submit on Monday through Lendio and the submission process was smooth; the loan, however, is still in processing limbo.

Available PPP funds will likely be exhausted today without further action from Congress. Thanks, DC.

🚨Update 4/4 1:11PM:

5 hours of Russian roulette. Our bank went live earlier this morning. After 5 hours of failed attempts, application restarts, and more random server errors than I can count, we were able to submit an application. The error handling was awful, but I don’t blame the developers given the time constraints. For our bank (PNC), this largely appeared to be an infrastructure scaling issue (countless 500 HTTP messages in the dev console).

🚨Update 4/3 5:26PM:

So, community banks are the answer? Based on Mnuchin’s tweet, I spent the entire afternoon calling 15 community lenders. I have 1.5 iffy leads to show for it. Everyone else is either in a holding pattern or only lending to existing customers.

🚨Update 4/3 1:28PM:

And there was one. Bank of America is now accepting applications and is the only major lender to do so. The bad news for most is that they are only doing so for existing customers with online biz checking accounts, who are active borrowers.

  • JPMorgan Chase, Wells Fargo, Citigroup, PNC, US Bank, Citizens, and Navy Federal Credit Union are not yet accepting applications.
  • Wells Fargo announced that they won’t be taking applications on Friday.
  • Banks like JP Morgan and BofA are requiring existing relationships as of mid-February, so if you weren’t already a customer, you’re out of luck.

Uh … right …

🚨Update 4/3 8:55AM:

🟨 False start. The SBA and Treasury issued final guidelines late yesterday, but many banks including US Bank, Wells Fargo, Chase and PNC appear to be balking, claiming they’re awaiting final guidance. A PNC loan rep told me this morning that they’re expecting a green light later today.

🚨Update 4/2 10:30PM:

  • Secretary Mnuchin stated that the program WILL launch tomorrow, April 3rd. In the same White House news briefing, he claimed to not be aware of complaints 🤔
  • Guidelines. SBA releases final implementaion guidelines.
  • Interest rate increase from .5% to 1%.
  • Independent contractors can no longer be included in your payroll calc.
  • Lenders will no longer be held liable for verifying borrower declarations.
  • Chase Bank not playing ball tomororw. “Financial institutions like ours are still awaiting guidance from the SBA and the U.S. Treasury. As a result, Chase will most likely not be able to start accepting applications on Friday, April 3rd, as we had hoped.”
  • Fees cannot be charged to the borrow.

🚨Update 4/2 5:30PM: There is a major 💩 storm brewing around the launch. Lenders were supposed to be taking applications starting at midnight, but it appears that the program is not yet ready for prime time. The situation is being described as pure chaos between the Treasury, the Small Business Administration, and commercial banks … and that it could “dwarf the failed kickoff of the Obamacare enrollment web site in 2013 “.

  • Underfunded. There may be as many as $1 trillion in loan requests against the available $350BN, on a first-come, first-serve basis. There are, after all, over 30 million small businesses in the U.S.
  • Incomplete process. The SBA and Treasury are still fighting over process and forms.
  • Unprepared. Rules are reported as unclear and many banks have no experience underwriting SBA loans.
  • Lack of participation. Thousands of banks have said they may not participate due to concerns of legal and financial risk.
  • Late changes. Banks are asking for higher interest rates and waivers of certain regulations. Yeah … the same banks we bailed out in ’08 🤦🏼‍♂️

Further, Treasury Dept just said that the program won’t be available for independent contractors, self-employed, sole proprietors and non-profits until next week.

Recommended reading:

How much can I get?

Average eligible monthly payroll costs (excluding compensation above $100,000) in wages x 2.5, but no more than $10,000,000.

Eligible payroll costs include: employee salary, wages and commissions; payment of cash tips; payment of vacation; parental, family, medical or sick-leave; allowance for dismissal or separation; payment required for group health benefits (including insurance premiums); payment of retirement benefits; or payment of state or local tax assessed on employee compensation; and sole proprietor income or independent contractor compensation not in excess of $100,000.

What can I spend it on?

Expenses for payroll, existing interest payments on mortgages, rent payments, leases, and utility service agreements. If you choose to use the money for other business-related expenses, that amount will not be forgiven.

Who's eligible?
  • Small businesses (under 500 employees) in operation on February 15, 2020
  • That are impacted by the COVID-19 crisis that can provide a “Good faith certification that the loan is necessary because of economic uncertainty caused by COVID-19 and will be applied to maintain payroll and make required payments”
  • Sole proprietors, independent contractors, gig economy workers, and self-employed individuals are all eligible for the Paycheck Protection Program
  • I’m hearing that if you’re a venture-backed startup that’s backed by a VC with greater than 500 employees across its portfolio, you won’t might not be eligible due to SBA affiliate rules. See this great Forbes article for a nuanced breakdown.
What are the terms?

I’m seeing mixed data on this one at the moment. Senator Rubio’s FAQ states a max 10-year term with interest capped at 4 percent, with a 6-12 month payment deferral. The SBA PPP page is now stating a maturity of 2 years and an interest rate of .5%. These statements don’t exactly contradict, so I suspect the SBA claim is just where the needle landed.

How does the forgiveness work?

After an 8 week period following loan disbursement, if the money was used solely for payroll (at least 75% of it), rent, mortgage interest, or utilities and you have not reduced headcount or cut salaries/wages by >25%, you can apply for forgiveness, effectively turning the loan into a tax free grant. You’ll be required to provide documentation to your lender, including items like payroll tax filings and proof of payments on mortgage, rent, and utilities. You will receive a decision within 60 days.

How do I apply?

The loans are administered by the SBA, but the SBA can’t possibly scale to meet the tsunami of demand that will come for these. Instead, you apply directly to an SBA 7(a) approved lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. The program will be available through June 30, 2020. 

How does this work with/compare to the EIDL?

A lot of folks are getting the PPP and the EIDL (Economic Injury Disaster Loans) confused. The EIDL is an SBA disaster relief loan that comes with a $10,000 advance grant. You can apply for both, but can only have one open. Should you get both, you will need to refinance the EIDL into the PPP for loan forgiveness purposes.

There’s also an excellent comparison table that gets into nuanced differences around things like collateral, eligibility, terms, etc.

What can I do now?

Don’t wait – start preparing. There will likely be millions of applications, so don’t be last in line. One loan officer I spoke with today said this is the busiest week she’s ever had … and they haven’t even started taking applications.

  • Reach out to your lender and get a conversation started. They’re probably already overwhelmed with calls, so be prepared to wait on hold.
  • Fill out the sample application just shared by the SBA.
  • Gather your supporting documentation. The list below was assembled from conversations with two different lenders, so your mileage may vary.

You may also need access to the following documents and calculations:

  • Articles of Incorporation/Organization of each borrowing entity
  • By-laws/Operating Agreement of each borrowing entity
  • All owners Driver’s Licenses
  • 2019 IRS Quarterly 940, 941 or 944 payroll tax reports
  • 1099s for 2019 for independent contractors that would otherwise be an employee of your business
  • Trailing twelve-month profit and loss statement (as of the date of application) for all applicants
  • Most recent Mortgage Statement or Rent Statement (Lease)
  • Most recent Utility Bills (Electric, Gas, Telephone, Internet, Water)
  • Breakdown of payroll benefits (vacation, allowance for dismissal, group healthcare benefits, retirement benefits, etc.)
  • When documenting the sum of all retirement plan funding that was paid by the Company Owner (do not include funding that came from the employee’s out of their paycheck deferrals).
    • Include all employees, including company owners
    • 401K plans, Simple IRA, SEP IRAs
  • Payroll Verification: Last 12 months of Payroll Reports beginning with your last payroll date and going backwards 12 months. Payroll report must show the following for the time period above:
    • Gross wages for each employee, including the officer(s) if paid W-2 wages.
    • Paid time off for each employee.
    • Vacation pay for each employee.
    • Family medical leave pay for each employee.
    • State and Local taxes assessed on the employee’s compensation for each employee.
What else should I know?
  • You are not required to show that credit is unavailable elsewhere
  • You are not required to demonstrate repayment ability
  • No personal guarantee is required to receive funds
  • No collateral needs to be pledged
  • If full principal is forgiven, you won’t be responsible for interest accrued in the 8 week covered period
  • No SBA fees, but the lender may still have a processing fee
  • No prepayment fee


Deriving ideas, style, or taste from a broad and diverse universe of sources, including but not limited to, software development, management, business matters, work from home life, emerging tech, and STEM parenting.

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About the Author

Josh Sloat is the co-founder of Aurora Consulting. He lives and works remotely from Northern Michigan. Josh has been developing software and leading cross-disciplinary teams for the past two decades, with broad-ranging experience in mobile, web and desktop technologies. When he’s not solving first-world tech problems, he spends his time as a domestic engineer (loving father and husband), avid backcountry adventurer, and aspiring landscape photographer.