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The Paycheck Protection Program Offers Unprecedented Assistance to Small Businesses
by Jeff Bodenstab
July 29, 2021

The Paycheck Protection Program Offers Unprecedented Assistance to Small Businesses

The federal government is offering unprecedented relief to small businesses through the recently enacted Paycheck Protection Program. This new program is designed to help businesses keep their workforce employed during the Coronavirus (COVID-19) crisis, so it is dramatically different in several ways:

  • While these are loans, up to the full amount of the loan can be forgiven if the borrower uses the funds to cover the first eight weeks of payroll costs, rent, utilities, and mortgage interest
  • There are no collateral requirements or personal guarantees
  • The interest rate is only 1 percent
  • All payments are deferred for six months
  • Loans can be approved as quickly as the same day

The Small Business Administration (SBA) expects to have this program up and running by Friday, April 3rd. Businesses should contact a participating SBA 7(a) lender, bank, or credit union to apply.

The program is for any small business with less than 500 employees, including sole proprietorships, independent contractors and self-employed persons. Small businesses in the hospitality and food industry with more than one location can also be eligible at the store level if the store employs less than 500 workers.  

It’s all about Employees and Payroll.  To be forgiven, most of the loan must be used to cover documented payroll costs and benefits including salary, wages, commissions, or tips. Payroll costs and employee benefits are defined broadly, so can include vacation, parental, medical, or sick leave, health insurance premiums, and retirement benefits. Most state and local employee taxes can also be included. A sole proprietor or independent contractor can cover income or net earnings from self-employment. The program is retroactive from Feb. 15, 2020, so employers can rehire recently laid-off employees. The cap is $100,000 on an annualized basis for each employee.

An additional 25% over and above the payroll cost can be used for mortgage interest, rent or utilities if they were already in place before February 15, 2020.  The loan proceeds should be used to cover costs over the 8 week period following the date of loan origination.

Terms are straightforward and consistent for all borrowers:

  • No collateral or personal guarantee are required. Instead, the SBA fully guarantees the loan.  (However, if the proceeds are used for fraudulent purposes, the U.S. government can pursue criminal charges)
  • Interest is 1% fixed rate
  • Loan payments are deferred for 6 months; although interest accrues over this period 
  • Maturity is 2 years 
  • Neither the government nor lenders will charge small businesses a fee
  • There are no prepayment penalties or fees 
  • The loan amount is capped at $10 million

Applying for the Program. To apply, businesses should contact a participating SBA 7(a) lender, bank, or credit union. Go to for a list of SBA lenders.  Small businesses and sole proprietorships can apply now. Independent contractors and self-employed individuals can apply starting April 10, 2020.  

You will need to provide your lender with payroll documentation and you certify that: 

  • Current economic uncertainty makes the loan necessary to support your ongoing operations.
  • The funds will be used to retain workers and maintain payroll or to make mortgage, lease, and utility payments. Going forward, employee and compensation levels will be maintained. 
  • You will provide documentation that verifies the number of full-time equivalent employees on payroll and the dollar amounts of payroll costs, covered mortgage interest, rent and utility payments for the eight weeks after receiving the loan.

The lender will calculate the eligible loan amount using the IRS tax documents you submit.

For clarifications, updates or additional information go to the SBA at Volunteers from SCORE and other SBA partners are also available to assist with preparing for the loan application. Feel free to reach out to your local SCORE chapter at or call 401-226-0077.

An unusually large amount of funding ($349 billion) has been set aside for this program and mobilization efforts are proceeding at exceptional speed.  This is a unique relief opportunity and most eligible small businesses should take advantage of it. 

For more than 50 years, SCORE has helped more than 11 million aspiring entrepreneurs and small business owners through mentoring and business workshops. More than 11,000 volunteer business mentors in more than 300 chapters serve their communities.

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About the author
Headshot of Jeff Bodenstab
Jeff Bodenstab
Jeff Bodenstab is a Providence, Rhode Island-based SCORE mentor and recently retired marketing executive, board member and co-founder with a career of helping build young businesses into larger enterprises.
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1165 Herndon Parkway, Suite 100
Herndon, VA 20170

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Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.

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