A funding specialist will get back to you soon.
If you can’t hang on then give us a call at (844) 284-2725 or complete your working capital application here.
With the Paycheck Protection Program (PPP) back in action, you may be wondering how much money your business is eligible for. Although determining the amount may seem complicated, it’s actually rather straightforward when you follow our 4 basic steps. We’ve created the easy-to-use guide below to help you calculate the maximum PPP loan amount that your business may potentially be eligible for.
It’s important to acknowledge that PPP was primarily designed to incentivize business owners to keep their employees on payroll. The SBA explains, “First Draw PPP Loans can be used to help fund payroll costs, including benefits, and may also be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations”.
For First Draw PPP loans, meaning those applicants who are taking a PPP loan for the first time, the maximum loan amount is 2.5 times the average monthly payroll for 2019 up to $10 million.
The maximum loan amount for Second Draw PPP loans is 2.5 times the average monthly payroll costs for 2019 or 2020 up to $2 million. Businesses with a NAICS code beginning in 72 (generally hospitality businesses) may receive up to 3.5 times the average monthly payroll costs.
Before you apply for a Second Draw PPP loan, you’ll need to verify that you can show at least a 25% drop in quarterly revenue in either Q1, Q2, or Q3 of 2020 compared to the same quarter in 2019.
How to Calculate if You Have a 25% Drop in Quarterly Revenue to Qualify for a Second Draw PPP Loan
For most businesses (self-employed businesses and a few other entity types have slightly different guidelines), here are the 4 steps to calculating your maximum loan amount.
→ Step 1: Calculate your total annual payroll costs. (First Draw loans will use 2019 payroll costs. Second Draw PPP loans will be able to use 2019, 2020, or the 12 months preceding the date of application to calculate average payroll costs in determining a maximum loan amount.) Included in payroll costs are:
→ Step 2: Divide your total payroll costs from Step 1 by the number 12 to calculate your average monthly payroll costs.
→ Step 3: Multiply your average monthly payroll costs (from Step 2) by 2.5.
→ Step 4: Add the outstanding amount of an Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020. Do not include the amount of any EIDL advance that you received. (EIDL advances are forgivable and do not need to be repaid or included in these calculations.)
Example of PPP Loan Calculation:
1. Total payroll for 2019 is: $600,000.
2. Monthly payroll is: $50,000 (calculated by taking $600,000 and dividing by 12)
3. Average monthly payroll times 2.5 is: $125,000 (calculated by multiplying $50,000 x 2.5)
4. No EIDL, therefore amount is $125,000.
Still have questions?
For more information about how to apply for a PPP loan, click here or call us at (844) 284 – 2725.
2 min read
Last week, the Small Business Administration (SBA) announced several changes to...
3 min read
Black History month is a great time to celebrate the accomplishments...
Want to stay up to date with the latest SBG Funding updates?
Leave your email address with us!
Leave your email address so we can keep in touch!