Frequently Asked Questions About Small Business Loans

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Contacts: Alex Strong
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Heather Voorman
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The Coronavirus Aid, Relief and Economic Security (CARES) Act expands the Small Business Administration’s (SBA) 7(a) loan program to include nearly $670 billion for a small business program called the Payroll Protection Program.

The Paycheck Protection Program is not provided through SBA directly, so the first step to qualifying for a loan through the Paycheck Protection Program is to find an SBA approved lender in your community. If your bank is not an SBA lender, you can find one using SBA's find-a-lender tool.  

Note: The SBA is currently not accepting new EIDL applications; however, NAHB will be fighting for additional funding in the next congressional stimulus package.

Who is eligible?
  • Small and medium sized businesses with fewer than 500 employees;
  • Nonprofits with fewer than 500 employees;
  • 501(c)(3) organizations (this is a tax-exempt designation conferred by the IRS based on the operations of the organization);
  • 501(c)(19) tax-exempt veterans organizations;
  • Sole proprietors;>
  • Self-employed individuals; and
  • Independent contractors who typically receive 1099s.
What are allowable uses for Paycheck Protection Program loans?
  1. Payroll costs — must account for 60% of your costs under the program;
  2. Certain costs related to the continuation of group health care benefits;
  3. Employee salaries (including commissions);
  4. Mortgage, rent and utilities payments; and
  5. Interest on any other debt obligations that were incurred before the covered period.
The CARES Act excludes from the definition of payroll costs any employee compensation in excess of an annual salary of $100,000. Does that exclusion apply to all employee benefits of monetary value?

No. The exclusion of compensation in excess of $100,000 annually applies only to cash compensation, not to non-cash benefits, including:

  • Employer contributions to defined-benefit or defined-contribution retirement plans;
  • Payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums; and
  • Payment of state and local taxes assessed on compensation of employees.
Do PPP loans cover sick leave?
Yes. 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). Learn more about the Paid Sick Leave Refundable Credit here.
My small business is a seasonal business whose activity increases from April to June. Considering activity from that period would be a more accurate reflection of my business’s operations. However, my small business was not fully ramped up on February 15, 2020. Am I still eligible?

In evaluating a borrower's eligibility, a lender may consider whether a seasonal borrower was in operation on Feb. 15, 2020, or for an eight-week period between Feb. 15, 2019, and June 30, 2019.

What if an eligible borrower contracts with a third-party payer such as a payroll provider or a Professional Employer Organization (PEO) to process payroll and report payroll taxes?

SBA recognizes that eligible borrowers that use PEOs or similar payroll providers are required under some state registration laws to report wage and other data on the Employer Identification Number (EIN) of the PEO or other payroll provider. In these cases, payroll documentation provided by the payroll provider that indicates the amount of wages and payroll taxes reported to the IRS by the payroll provider for the borrower’s employees will be considered acceptable PPP loan payroll documentation. Relevant information from a Schedule R (Form 941), Allocation Schedule for Aggregate Form 941 Filers, attached to the PEO’s or other payroll provider’s Form 941, Employer’s Quarterly Federal Tax Return, should be used if it is available; otherwise, the eligible borrower should obtain a statement from the payroll provider documenting the amount of wages and payroll taxes. In addition, employees of the eligible borrower will not be considered employees of the eligible borrower’s payroll provider or PEO.

Should payments that an eligible borrower made to an independent contractor or sole proprietor be included in calculations of the eligible borrower’s payroll costs?

No. Any amounts that an eligible borrower has paid to an independent contractor or sole proprietor should be excluded from the eligible business's payroll costs. However, an independent contractor or sole proprietor will itself be eligible for a loan under the PPP, if it satisfies the applicable requirements.

What’s the interest rate on Paycheck Protection Program loans?

1% fixed rate

What size business loan do you qualify for?

The CARES Act allows businesses to take out loans equal to 2.5 times their average monthly payroll from 2019 with the total capped at $10 million. Payroll figures include salary and wages, health care benefits and paid sick leave.

What time period should borrowers use to determine their number of employees and payroll costs to calculate their maximum loan amounts?

In general, borrowers can calculate their aggregate payroll costs using data either from the previous 12 months or from calendar year 2019. For seasonal businesses, the applicant may use average monthly payroll for the period between Feb. 15, 2019, or March 1, 2019, and June 30, 2019. An applicant that was not in business from Feb. 15, 2019, to June 30, 2019, may use the average monthly payroll costs for the period Jan. 1, 2020, through Feb. 29, 2020.

Borrowers may use their average employment over the same time periods to determine their number of employees, for the purposes of applying an employee-based size standard. Alternatively, borrowers may elect to use SBA's usual calculation: the average number of employees per pay period in the 12 completed calendar months prior to the date of the loan application (or the average number of employees for each of the pay periods that the business has been operational, if it has not been operational for 12 months).

How do I apply for a Paycheck Protection Program loan?

This program is not provided through SBA directly, so the first step to qualifying for a PPP loan is to find an SBA approved lender in your community. Your lender can guide you through the application process.

To find an SBA lender in your community, click here. You can also contact the national SBA office at 1-877-475-2435 or email If you are having trouble getting through to, or getting your questions answered by, the SBA, please submit this form, and NAHB staff will follow up and provide additional guidance as needed.

What do I need to apply?

You will need to complete the Paycheck Protection Program loan application and submit the application with the required documentation to an approved lender that is available to process your application by August 8, 2020. Click here for the application.

You will also need to provide your lender with payroll documentation.

NOTE: NAHB is providing this information for general information only. This information does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind nor should it be construed as such.

Issues with the Loan Programs? If you are having problems getting your questions answered by the Small Business Administration, please let us know.
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