Capital Investment Advisors

Understanding The CARES Act Paycheck Protection Program (PPP) for Small Businesses

The recently enacted Coronavirus Aid, Relief, and Economic Security Act (CARES) earmarks $350 billion in forgivable loans for small businesses. This initiative, the Payroll Protection Program (PPP), could be a game-changer for companies across the country. The maximum loan is a hefty $10 million, and any small business affected by the Coronavirus (COVID-19) is eligible.

There are 30 million small businesses in America that employ almost 59 million people.

They are the backbone of the job market and the economy in the US. Many of these small companies have laid off or furloughed employees because of the devastating economic effects of COVID-19. These businesses desperately need help if they are to survive while the economy is in cardiac arrest.

In my view, small businesses can be triaged as follows based on the impact of COVID-19:

Red light (needs the most government help)

Yellow light (need some help)

Green light (need little to no help)

The red-light category includes the firms hit hardest by the widespread shutdown of our economy and daily life. I’m talking about businesses that have lost 50% or more of their average revenue. These businesses are often highly people-oriented. Think bars, coffee shops, restaurants, and entertainment venues. Personal care enterprises – barbers, hair salons, spas, and nail salons – also make the red list.

Yellow light businesses have seen a slowdown in profit of between 10% to 50%. Professional service firms are one example. Attorneys, advertising salespeople, graphic designers, and real estate agents are feeling the pain.

The green light businesses are those that have lost 10% or less or perhaps have seen their revenue increase. These companies include grocery stores, big box stores, toilet paper manufacturers and makers of personal protective equipment, such as gloves, gowns, and masks.

The PPP is designed to provide a lifeline to small businesses, nonprofits, Tribal businesses, and veterans’ organizations with 500 employees or fewer.

It’s important to note that for multi-location operations, the 500-employee limit is per location. The program offers partially forgivable loans to cover short-term operating expenses during this economic crisis.

The goal is to keep people employed without layoffs and rehires. This revenue replacement program is designed to allow businesses in the red-light category to effectively hibernate during this period without having to make massive payroll changes. But yellow-light companies might consider applying, too, to have the dry powder to bridge this economic gap.

The maximum loan size is equivalent to 250% of the employer’s average monthly payroll costs for two months (eight weeks) from the last year, or $10 million, whichever is less. There’s a broad definition for payroll costs; wages, salaries, retirement contributions, healthcare benefits, covered leave, and other expenses are all included. There’s also a $100,000 cap on the amount of pay that each employee can earn.

The program includes a number of generous features for borrowers, including six months to one year of deferred repayment, fee waivers, and streamlined application requirements.

Most importantly, borrowers are eligible for loan forgiveness equivalent to the sum spent on covered expenses during the eight weeks after the loan originates. Those covered expenses include the bulk of a typical business’s fixed operating costs: payroll, rent, utilities, and mortgage interest obligations.

Even if a business doesn’t immediately need the loan, it’s nice to have the assurance of cash in the bank. And, if you don’t spend it, then you can simply give it back after this is all over.

Does the PPP cover solo entrepreneurs? 

When we think of a small business, we tend to think of 10 to 20 person companies. The definition for the PPP is any business with less than 500 employees. Those seem pretty big! However, CARES legislation specifically includes the 24 million out of 30 million small business owners that are essentially one-person companies. Let me say that again. Eighty percent of small businesses in America are individuals operating as solo entrepreneurs. That’s why the PPP was specifically designed to include them.

This includes:

Sole proprietors who report income and pay taxes on a Schedule C in your personal tax return.

Independent contractors who collect 1099-MISC forms.

Gig economy workers who take on-call jobs provided by companies such as Uber, Lyft, TaskRabbit, and Instacart.

It’s important to note that that your business must have been operational as of February 15, 2020. If you started your business after that date, you will not be eligible for this program.

This article goes into more detail on what the PPP means for the three above types of entrepreneurs.

Here are some resources for small business owners to learn more about PPP and to apply for a loan.

The Payment Protection Program (PPP) is being administered by banks that are Small Business Administration (SBA) lenders. Your first step is to reach out to your current banker as soon as possible. Some banks are awaiting further application guidelines from the SBA, but tell your banker you want an application as soon as it becomes available. Banks will start taking applications by April 3, 2020. So after you contact your current banker, start gathering the necessary paperwork so you’re ready to complete the loan application including tax returns, internal financial statements and payroll documentation. 

Paycheck Protection Program (PPP) Helpful Links 


  • U.S. Department of the Treasury Paycheck Protection Program Overview for BORROWERS 
  • U.S. Small Business Administration Paycheck Protection Program (PPP) OVERVIEW 
  • U.S. Small Business Administration Paycheck Protection Program (PPP) SAMPLE APPLICATION Form. 

GEORGIA DISTRICT OFFICE (U.S. Small Business Administration): 

  • Local SBA RESOURCE PARTNERS pages 11-12 
  • Local SBA LENDERS pages 29-31 

TOP 9 NATIONAL SBA LENDERS (by Approval Amount through December 31, 2019 click HERE) 

1. Live Oak Banking Company click HERE 

2. Newtek Small Business Finance click HERE 

  • Paycheck Protection Program (PPP) apply HERE 

3. Byline Bank click HERE 

  • SBA Paycheck Protection Program click HERE 

4. Huntington National Bank click HERE 

  • COVID-19 response click HERE 

5. Celtic Bank Corporation click HERE 

6.  JPMorgan Chase click HERE 

  • Small Business Paycheck Projection Program click HERE 

7. U.S. Bank click HERE 

  • COVID-19 information click HERE 

8. KeyBank click HERE 

  • COVID-19 information click HERE 

9. Readycap Lending click HERE 

  • Paycheck Protection Program (PPP) apply HERE 

Update: As of 4/16, the SBA and white house announced that the first round of appropriated funds for PPP & EIDL have been exhausted. That’s right, all $350 billion of it, in two weeks. There is an additional stimulus on the docket right now. Due to the demand, I hope they come to a resolution quickly, but that will take a few more days possibly weeks.

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