Loan details
PPP loans have an interest rate of 1%. Loans issued prior to June 5, 2020, have a maturity of two years. Loans issued after June 5, 2020, have a maturity of five years.
How long do I have to pay back my COVID-19 PPP loan? The short answer to this question is that you have 5 years (previously two years; see “important update” above) to pay back your PPP loan and the 1% interest that accrues from the time that you receive it.
Yes. PPP loans (the full principal amount and any accrued interest) may be fully forgiven, meaning they do not have to be repaid. If you do not apply for forgiveness, you will have to repay the loan.
In order to be forgiven, at least 60% of the loan amount needs to be used for payroll purposes. If less than 60% of your loan is used for payroll, you can still be eligible for forgiveness, with the amount you spend correlating directly to forgiveness.
Claiming deductions for expenses paid with PPP loan funds can lead to federal tax evasion charges as well. Under 26 U.S.C. § 7201, federal tax evasion carries fines of up to $100,000 (for individuals) or $500,000 (for corporations) and up to five years of federal imprisonment.
Who Qualifies for a PPP Loan? Any small business with 500 or fewer employees may be eligible. This includes small businesses, S corporations, C corporations, LLCs, private nonprofits, faith-based organizations, tribal groups and veteran groups.
PPP loans are calculated using the average monthly cost of the salaries of you and your employees. If you're a sole proprietor or self-employed and file a Schedule C, your PPP loan is calculated based on your business' gross profit (or gross income). Your salary as an owner is defined by the way your business is taxed.
How and when to apply for loan forgiveness
If you find that you are ineligible for full or partial loan forgiveness you will need to pay back at least some of your PPP loan. ... If you don't apply for loan forgiveness, your loan payments will be deferred for 10 months after the end of your selected covered period (8 or 24 weeks, depending on your loan)
The maximum amount of money you can borrow as a first-time PPP borrower is 2.5 times your average monthly payroll costs, up to a maximum of $10 million. That means, for example, if your average monthly payroll in the last 12 months was $100,000, you could borrow up to $250,000.
Can I use all the PPP funds to pay myself? No, and this applies to all small businesses. Keeping your employees laid off and increasing your own pay goes against the purpose of the program. Your forgivable amount would be reduced because your headcount was lower than before.
PPP loans covers payroll costs, including costs for employee vacation, parental, family, medical, and sick leave. However, the CARES Act excludes qualified sick and family leave wages for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act (Public Law 116–127).
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