Established by the CARES Act, the Paycheck Protection Program offers loans to keep small businesses afloat during the COVID-19 crisis.
Established by the CARES Act, the Paycheck Protection Program offers loans to keep small businesses afloat during the COVID-19 crisis. AFP / Angela Weiss

While April 3rd was the official rollout of the Paycheck Protection Program (PPP) for most small businesses (independent contractors/self-employed individuals can start applying on April 10th), unfortunately the combination of high demand and not-yet-final information from the Small Business Administration made loan processing difficult for most banks. The SBA continues to clarify the requirements, so we expect that will help banks begin to process the loans very soon.

Because a high volume of applicants is expected and because the funds set aside by Congress for the PPP loans are limited, small business owners are encouraged to apply as soon as possible. The cutoff for applications is June 30, 2020.

Most banks and credit unions will be servicing these loans for the SBA and will need to verify documentation when you apply for the loan. You should contact your local lender--preferably the bank where your company maintains its account, and/or with which your company has taken out financing or a line of credit or corporate credit card--to ensure that they are participating, and the exact requirements necessary to obtain a loan.


To get you started, here are several items most banks are requiring to be sent in with your application:

  • 2018 (or 2019 if done) income tax returns
  • 2019 IRS Quarterly 940, 941, or 944 payroll tax reports, as well as state unemployment returns
  • 2019 year-to-date payroll register, as well as 2020 year to date register through March 31 (note that some payroll companies are already offering a link to the reports needed to apply for this loan, if you have electronic access to your payroll account)
  • 1099s received for 2019 if you are an independent contractor
  • Monthly group health insurance premium invoices for all of 2019 and January through March 2020.
  • 2019 profit sharing reports from your third-party administrator that document all retirement funding (does not include the funding that came from employees out of their paycheck deferrals)

You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution participating in the program. The application must be made through a lender.

By way of quick review, the Paycheck Protection Program provides potentially forgivable loans to small businesses in order to maintain current levels of payroll and to assist in covering the overhead of the business, such as rent and utilities, for an eight-week period. The SBA will oversee the administration of these loans and has a website dedicated to the Paycheck Protection Program. The Department of the Treasury also provides some information for small businesses.

Basically, you can apply for a loan of up to 2.5 times your average "payroll costs" for the preceding 12 months (April 1, 2019 through March 31, 2020). Payroll costs include wages, unemployment taxes, health insurance and retirement benefits, but are capped at an annualized $100,000 for each employee earning over $100,000.

Should you need a quick resource that summarizes the key tax-related provisions of the CARES Act, this chart (courtesy of Buckingham Strategic Partners) provides an overall look at the terms of, and uses and requirements for Paycheck Protection Program, the Economic Injury Disaster Loan Program, and various IRS directives.

Peter N. Riefstahl is a supervisor at Louis T. Roth & Co., PLLC, a Louisville, KY-based Certified Public Accounting firm that specializes in tax planning, accounting, and business consulting services.