President Trump and Congress passed the Payroll Protection Program, known as PPP, in response to the novel coronavirus that has upended that national economy and put many companies temporarily out of business. As you might expect, banks still need to iron out several details before making payroll protection loans readily available to business owners. In the meantime, however, you can gather documents and determine the maximum amount you can borrow. That way you will be prepared when banks start accepting applications for payroll protection loans.

How Much Can You Borrow Under the PPP?

During the first week of April 2020, the Small Business Administration (SBA) released an Interim Final Rule on payroll protection loans. Under these guidelines, you as a business owner can apply for a maximum loan of $10 million dollars from the SBA or 2.5 times the typical cost of your entire payroll. Follow these steps to determine your specific amount:

  • Calculate payroll totals for all employees with an address in the United States over the past 12 months. 
  • Deduct compensation paid to any employee or independent contractor that exceeds $100,000 per year. 
  • Divide the amount from the second step by 12 to arrive at your average monthly cost of payroll. 
  • Use the figure from the above step and multiply it by 2.5. 
  • Add any amount received between January 31 and April 3, 2020, under the Economic Injury Disaster Loan. Be sure to subtract the amount of any advance you received under this loan and the COVID-19 loan since you don’t need to repay the latter.  

The formula differs and is a bit simpler for sole proprietors and independent contractors with no employees as well as those with employees. If this describes your situation, we would be happy to explain it to you in more detail when you meet with a representative from Nations Capital Financing. We understand this is a challenging and stressful time, and we are here to help you however we can.