The Washington PostDemocracy Dies in Darkness

How to get a small-business loan under the new $484 billion coronavirus aid package

President Trump listens as Jovita Carranza, administrator of the Small Business Administration, speaks during a coronavirus briefing in early April. (Mandel Ngan/AFP/Getty Images)
Placeholder while article actions load

A $484 billion coronavirus aid deal finalized Tuesday promises to breathe new life into two small-business loan programs that are designed to combat the economic devastation caused by the coronavirus.

In recent weeks, the Small Business Administration and thousands of its affiliated banks were overwhelmed by an unprecedented crush of applications, forcing a temporary halt to some lending activities. Although the programs succeeded in quickly pumping hundreds of billions of dollars into an economically devastated business community, many small companies are still awaiting funds.

The initial loan rollout was marred by glitchy Web portals, a chaotic regulatory process, a frustrating lack of cooperation from big banks and a struggling bureaucracy. Some large hotel and restaurant chains received loans that were meant for Main Street businesses, prompting calls for changes.

The bipartisan deal finalized Tuesday includes $310 billion for the Paycheck Protection Program, a new federal loan program that allows qualified banks to offer low-interest loans that can later be forgiven. It also provides $60 billion for Economic Injury Disaster Loans, a parallel program operated by the SBA.

Here are some questions and answers about how your business can access the new funding:

How do I apply for a small-business loan through the Paycheck Protection Program?

The most recent application form is posted on the Treasury Department’s Cares Act resource page. Once you gather the information described in the form, you should contact an SBA-approved lender. You can find one by plugging your Zip code into an online tool on the SBA’s website.

Borrowers are advised to apply online or by phone rather than in person. If you don’t already have an established banking relationship, your application will be handled on a first-come, first-served basis, SBA and Treasury Department officials have said.

Congress approved an additional $310 billion after the initial $349 tranche of PPP funding ran out just two weeks after its launch in early April. Banks are cleared to start processing those loans as of 10:30 a.m. on Monday, April 27.

How do I apply for an SBA disaster loan?

The SBA has traditionally accepted disaster loan applications through an online portal on the agency’s website, by mail, or at its field offices. On May 4 the SBA opened up its EIDL loan program up on a limited basis to agricultural businesses. Those businesses can apply online with the SBA’s streamlined application form:

Can I apply for both SBA loan programs?

Yes. Businesses that receive a disaster loan can later refinance it into any Paycheck Protection Program loans they receive, offering a chance to lower the interest rate. A single business cannot apply for more than one PPP loan, however.

Which businesses qualify for the SBA loan programs?

For the Paycheck Protection Program: Small businesses, nonprofit organizations and tribal business concerns that meet the SBA’s standard business-size definition and veterans organizations organized under 501(c)(19) with fewer than 500 employees are eligible for loans under the program. Self-employed individuals, independent contractors and sole proprietors also are eligible. Specific criteria for which nonprofit organizations are eligible can be found on page 15 of the Treasury’s Department’s May 5 Q&A document.

To receive a loan, your company must have been in business as of Feb. 15. A change in ownership after Feb. 15 should not affect its eligibility even if the tax ID changes, according to Treasury Department guidance issued April 29.

Churches also qualify to the extent that they meet the other requirements of the Cares Act, the SBA announced April 18. Large hotel and restaurant chains can get loans for individual locations, although that practice has been met with controversy. Shake Shack agreed to return its $10 million SBA-backed loan after news articles identified it among several large restaurant and hotel chains receiving small-business loans.

“Household employers,” which include people who hire nannies and housekeepers, are excluded from the program.

For SBA disaster loans: Businesses that have fewer than 500 employees and are unable to pay their bills because of the coronavirus can apply.

There are criminal penalties of up to $1 million for submitting fraudulent information to a federally insured lender.

Your money and the pandemic: A guide to personal finance during coronavirus

My primary bank won’t accept my PPP application because I don’t have a business account with it. What should I do?

Many banks, including Bank of America and JPMorgan Chase, have limited applications to customers with preexisting relationships. Under the program, banks must conduct due diligence on small businesses’ applications, and banking industry officials have said that process is easiest with companies they already know well.

That led to complaints from some mom-and-pop businesses that they were being crowded out of the program by larger companies with extensive ties to big banks.

Many, but not all, smaller community banks and credit unions are accepting applications from new customers. Also, the new funding bill includes $60 billion for lenders with less than $50 billion in assets, giving small community banks a carve-out the industry has said will help them serve smaller companies.

My bank never responded to the application I filed before the initial $349 billion was exhausted. Should I apply again?

Nearly 80 percent of the small businesses that applied for a loan were still waiting for an answer as of April 17, the day after the program ran out of money, and many didn’t know where they stood in the process, according to the National Federation of Independent Business.

Banks have said they process loans on a first-come, first-served basis, and many continued accepting applications after the program’s initial funds were exhausted. Small-business owners should check with their banks to determine where they stand in the process.

What costs will the new loans cover?

The new loans will cover payroll costs, employee benefits, mortgage interest incurred before Feb. 15, rent and utilities under lease agreements in force before that date, and utilities for which the service began before February. At least 75 percent of the loan must go to payroll, according to a regulation published April 2.

Payroll costs include salary wages, commissions and tips capped at $100,000 for each employee. It also includes benefits for vacation, parental leave, medical leave, sick leave and some other limited benefit categories. It also includes any housing allowances or stipends, according to an April 26 Treasury Department fact-sheet. Your payroll calculation should include employees who are classified as “full-time, part-time or other basis," but not independent contractors, according to the Treasury Department.

The Paycheck Protection Program excludes sick and family leave that also qualifies for certain Internal Revenue Service tax credits, according to an April 6 fact sheet from the Treasury Department. Information on Cares Act tax credits can be accessed on the IRS website here.

The Treasury Department directs borrowers to calculate their payroll for purposes of the loan program without including federal taxes. The department has a detailed description of how it considers taxes on Page 5 of its April 6 Q&A.

You should not include payments your business makes to independent contractors or subcontractors, because the Treasury Department directs them to apply separately.

The new loans apply to costs incurred from Feb. 15 to June 30, although that time period can be adjusted for businesses with especially seasonal income. Specific rules for seasonal businesses can be found in this April 28 SBA regulation.

More detailed information about how to calculate your loan amount is included in the Treasury Department’s April 24 Q&A document.

What’s the interest rate?

Interest rates for the Paycheck Protection Program were initially set at 0.5 percent but were increased to 1 percent after lenders raised concerns. The Cares Act caps PPP loans at 4 percent, so it is possible the rate could increase again. The interest you pay on a PPP loan can be forgiven if you are able to keep paying employees during the first 8 weeks after you receive the loan.

Interest rates on disaster-assistance loans are set at 3.75 percent for small businesses and 2.75 percent for nonprofit groups.

Can my SBA loan be forgiven?

Yes. The program includes loan forgiveness covering costs for the first eight weeks of the loan for companies able to keep employees on the payroll or continue paying bills throughout the coronavirus crisis. The eight-week period begins on the date the lender makes the first disbursement of funds under the loan, according to the Treasury Department.

The amount of loan forgiveness will include payroll costs for individuals below $100,000 in annual income, mortgage and rent obligations, including interest and utility payments, according to the SBA. If an employee is above a $100,000 annual salary, the first $100,000 will be factored into the company’s loan forgiveness total excluding any amount above that. The payroll cost includes health-care benefit payments, retirement benefits, and state and local taxes. It excludes employees who live outside the United States, according to the SBA.

The Treasury Department clarified on May 3 that it would not penalize employers who offer to rehire employees who decline the new job offer. More specific information about re-hiring employees can be found on page 13 of the Treasury

The SBA provides a detailed description of how payroll should be calculated on Page 8 of this SBA regulation.

The amount of loan forgiveness will be reduced if your workforce is drawn down through attrition or if wages are reduced. You may be able to preserve some of your loan forgiveness by hiring employees back, however.

Although SBA disaster loans cannot be forgiven, they can be refinanced into a forgivable Paycheck Protection Program loan.

The SBA is expected to release more information about how to apply for the loan forgiveness. This page will be updated when it does so.

Are you waiting on a stimulus check, a loan or unemployment assistance from the Cares Act? Tell The Post.

How do I prove that my business needs a loan?

The new loans are available to any business for which “current economic uncertainty makes the loan necessary to support your ongoing operations,” according to an SBA fact sheet. Your lender will determine whether you qualify without a separate SBA review, although the SBA will check to see whether you have already received one.

The SBA and Treasury Department have ;allowed borrowers to attest to their own need “in good faith,” but has offered very little specific information as to who needs a loan and who does not.

Under the Paycheck Protection Program, borrowers are allowed to attest to their own need for a coronavirus aid loan. The Cares Act suspends a normal requirement that SBA borrowers must be unable to obtain credit elsewhere.

Borrowers are expected to self-certify “in good faith” that they actually need the loan, “taking into account their current business activity and their ability to access other sources of liquidity sufficient to support their ongoing operations in a manner that is not significantly detrimental to the business,” according to Treasury Department guidance released April 23.

In a possible reaction to news reports of large restaurant and hotel chains receiving SBA loans, the Treasury Department clarified Thursday that large publicly-traded companies with access to other credit sources will probably not qualify. The SBA retains the right to audit borrowers.

“It is unlikely that a public company with substantial market value and access to capital markets will be able to make the required certification in good faith, and such a company should be prepared to demonstrate to SBA, upon request, the basis for its certification," according to the Treasury Department.

Businesses that return the money by May 7 will be determined to have acted in good faith, the Treasury Department said. The Treasury Department has announced that it plans to audit all loans larger than $2 million after a series of large businesses ― Ashford Hospitality Trust, Ruth’s Chris Steak House and the Los Angeles Lakers, to name a few ― received Paycheck Protection Program loans and later returned them. The Treasury Department is expected to issue further guidance on this in the coming weeks. This page will be updated when it does so.

How much money can my business receive through the new loan program?

The Paycheck Protection Program provides small-business loans of up to $10 million to cover payroll and certain other expenses, or 2.5 times your total payroll expenses for the loan period. Other SBA loan programs, including the federal disaster relief program, offer much smaller loans.

What sort of thing could disqualify me?

The SBA disqualifies businesses that are “engaged in any activity that is illegal under federal, state or local law,” according to an SBA regulation. You will be excluded from the program if any of your company’s owners have been suspended, debarred, proposed for debarment or declared ineligible, are involved in bankruptcy proceedings or have previously taken a small-business loan that caused the government to incur losses, according to the Treasury Department’s application form.

Businesses involved in illegal gambling activities or the sale of cannabis are considered categorically ineligible for the Paycheck Protection Program, according to SBA officials and regulatory documents. Businesses that receive a limited amount of legal gambling revenue are eligible, however. Specific rules for gambling revenue are detailed on page 15 of this April 14 Treasury Department regulation.

Felony convictions exclude you only if it happened within the past five years, according to the Treasury Department.

I am a sole proprietor. Can I use the loan to pay my own salary?

According to an SBA regulation published April 16, independent contractors and sole proprietors can calculate their payroll by adding up “wages, commissions, income, or net earnings from self-employment or similar compensation.”

An April 14 regulation published by the Treasury Department lists “owner compensation replacement” among the allowable costs for a PPP loan. The exact amount of your loan could depend in part on how much you spend during that period, according to the Treasury Department.

Don Cole, chief executive of Bethesda, Md.-based Congressional Bank, says the Treasury Department’s decision to include owner compensation replacement “essentially means they can keep a portion of it as the equivalent of paying themselves a salary.”

My business is classified as a partnership. Am I eligible?

Yes. Your partnership should submit a single, unified application in which the self-employed income of all general active partners counts toward the payroll cost. The Treasury Department specified in an April 14 regulation that partnerships are limited to just one application.

My business operates as a franchise of a larger national brand. Am I eligible for a Paycheck Protection Program loan?

Franchisees are eligible only if they have registered as a franchisee and been added to the Small Business Administration’s official directory. If a franchise does appear in the directory, it can apply for a PPP loan as an independent business, according to an April 26 Treasury Department Q&A document.

Individual franchisees are directed to apply for a PPP loan on their own and not as a part of a larger brand. Each individual franchise can receive up to $10 million and cannot receive more than one PPP loan.

Hotel and restaurant franchises that have a North American Industry Classification System (NAICS) code beginning with 72 are also eligible for Paycheck Protection Program loans, according to the Treasury Department. A detailed description of how the SBA’s affiliation rules apply to these businesses starts on page 7 of the Treasury Department’s April 26 Q&A document.

The SBA’s rules and regulations have changed since I submitted my application. Do I need to apply again?

No. The SBA and Treasury Department have continually issued new regulations since the Paycheck Protection Program’s April 3 start date.

The Treasury Department stated in a recent fact-sheet that borrowers and lenders “may rely on the laws, rules, and guidance available at the time of the relevant application.”

If a borrower’s application has not yet been processed, however, it can make modifications to account for new rules, the Treasury Department stated.

My business is involved in gambling activities. Can I get a Paycheck Protection Program loan?

Yes, as long as your business satisfies the SBA and Treasury Department’s other rules. The initial $349 billion round of Paycheck Protection Program funding was limited to businesses that had less than 50 percent of their revenue from legal gambling activities, according to an April 2 regulation.

However an April 24 regulation changed the rules so that gaming revenue would not exclude an otherwise-eligible business.

“A business that is otherwise eligible for a PPP Loan is not rendered ineligible due to its receipt of legal gaming revenues, and 13 CFR 120.110(g) is inapplicable to PPP loans. Businesses that received illegal gaming revenue remain categorically ineligible,” The Treasury Department wrote. "On further consideration, the Administrator, in consultation with the Secretary, believes this approach is more consistent with the policy aim of making PPP loans available to a broad segment of U.S. businesses.”

What if the money runs out again?

Some banking-industry officials have warned that this could happen.

After the initial $349 billion was exhausted, many banks continued to process applications that they plan to submit once the program receives more funding. Industry officials have said they expect the money to be spent faster this time, potentially in just a few days, since so many applications will be submitted at once. Also, kinks in the program that slowed the application process initially have largely been worked out, which banking officials say should also speed the process.

If that happens, it will be up to Congress to decide whether to provide the Paycheck Protection Program even more funding.

Economists at Bank of America have said the program may ultimately need close to $1 trillion to help all eligible small businesses.

This article did not answer my question. How can I find more information?

If you would like to suggest an additional question for this article, please email the author at

Your primary points of contact for information on federal loan programs should be the Small Business Administration or an SBA-qualified financial institution. You can reach the SBA by email at or by phone at 800-827-5722.

You can find detailed documentation on Paycheck Protection Program rules and regulations on the Treasury Department’s COVID-19 resource page.

Have a story tip about the small-business program or other aspects of how the government is handling the coronavirus relief law known as the Cares Act? Send an email to