How does the Paycheck Protection Program impact the national income and product accounts NIPAs? U S Bureau of Economic Analysis BEA

The Paycheck Protection

This means that if you apply for a PPP loan you should consider applying for the maximum amount. This limitation will also help advance Congress' goal of keeping workers paid and employed across the United States. The program did so in part by allowing businesses normally ineligible to receive SBA loans to obtain substantial PPP funds. The SBA also minimally enforced its own rules on company affiliations to larger entities, such as companies backed by deep pocketed private equity funds, enabling the PPP to become a cash grab opportunity for well-resourced industries and companies. This testimony addresses which small businesses received early PPP loans and how program changes affected small business participation in PPP.

Loans can be made by existing SBA lenders, federally insured banks and credit unions, and other SBA approved lenders. PPP loans are available to both new recipients who have not received a First Draw PPP loan as well as those seeking a Second Draw loan. The loan program has closed now, and borrowers can ask for loan forgiveness. Were these initiatives effective in increasing application take-up by nonemployer firms and small employer firms?

The Paycheck Protection

Overall, the relationship between the severity of the labor market disruption due to the pandemic and subsequent PPP funding per job lost appears to be negative—hard-hit areas got less PPP support. While the precise location of bank PPP lending is unknown, it can be estimated by assuming that lending is distributed across counties in proportion to a bank’s county-level deposits. But the PPP also shows that administrators can improve their performance over the course of an emergency fund program and mitigate the speed–accuracy tradeoff. Both back-end adjustments and distribution in descending order of necessity allow distribution to take place immediately, while anticipating adjustments to distribution policy later. To navigate future crises, policymakers can learn from the flaws of pandemic-era loan distribution. SBA has determined that this rule will not have substantial direct effects on the States, on the relationship between the National Government and the States, or on the distribution of power and responsibilities among the various layers of government.

Fighting Identity Theft A top priority in the watchdog community is fighting criminals who steal identities and pocket pandemic relief. Scroll through our interactive timeline to see how we’re protecting your identity – and your money. In the absence of a pre-loan approval written agreement between the agent and Bank of America, Bank of America does not pay fees or other compensation to agents who represent or assist borrowers through the Paycheck Protection Program. An unemployment claim is a request an individual makes to a state government to receive temporary payments after having been laid off from a job. The CAA expanded the types of expenses for which a business could use Round 3 PPP funds. Eligibility for PPP funding was extended to small business owners with non-fraud related felonies as long as the applicant was not incarcerated at the time of the application.

What is the Paycheck Protection Program?

About 20% to 25% of unemployment insurance payments went to households with incomes in the top 20% of the national distribution, while just 10% to 15% of stimulus checks—up to $1,200 per adult and $500 per qualifying child—went to households with that level of income. The greater progressivity of the latter was due primarily to income caps limiting eligibility, the authors noted. Loans were uncollateralized, were nonrecourse (i.e., no other assets of the borrower were at risk), did not require a personal guarantee by the borrower and came with a 100% U.S. Loans were forgiven if borrowers certified that the funds were used within a specified period for payroll, utilities, rent or mortgage payments and that certain employment targets were maintained. A business may disregard wage reductions to any employee who received wages exceeding $100,000 annualized during any single pay period in 2019. A business may also disregard wage reductions if it eliminated the wage reduction by June 30, 2020.

The Paycheck Protection

If applying for a second draw loan exceeding $150,000, it must have already sent a completed loan forgiveness application to the lender. PPP loan forgiveness is generally based on what the loan proceeds were spent on, to what extent the business maintained or rehired its employees, and to what extent it maintained the wages and hours of its employees.

The paycheck protection program wasn’t just about paychecks

ADP has put together a Loan Forgiveness Checkup which outlines important steps to take before year-end to maximize loan forgiveness. If you lay off employees, the forgiveness amount will be reduced by the percentage decrease in your number of employees. If your total payroll expenses on workers making less than $100,000 annually decreases by more than 25%, the loan forgiveness amount will be reduced by the wage decrease exceeding 25%. If you laid off some employees or reduced employees’ wages, you can still be forgiven for the full amount of your payroll cost if you rehire your employees or restore their original wages by the end of your covered period. For loans under $50,000, you may still qualify for full forgiveness even if you have reduced your number of employees or decreased salaries and wages.

In the weeks prior to loan disbursement, balances were more than 30 percent lower than the prior year, compared to a decrease of less than 5 percent across all firms in this sample. Revenues and expenses were approximately 60 percent lower than the prior year. Upon loan disbursement, balances increased more than 200 percent compared to a year ago. This median change in balance is higher than what we observe across all firms partly because the typical restaurant had lower than median balances pre-pandemic and partly because the median PPP loan to restaurants was larger than the typical PPP loan. Ultimately, 5.2 million loans were approved before the PPP closed on August 8, 2020, comprising a total of over $525 billion . Given the magnitude of the program, policymakers will be interested in its effects, especially as longer term small business outcomes emerge. JPMC Institute data can provide initial insight into loan amounts relative to all operating expenses as well as small business cash flows in the weeks before and after the PPP loans were disbursed.


While the PPP loan program has officially stopped accepting loan applications, information and financial documents used during the application process may also help small businesses seeking funding for bounce-back initiatives and to fuel growth today. The SBA Paycheck Protection Program is designed to keep your workers on payroll and your doors open. The program provides access to low interest and partially to fully forgivable loans to small business owners and nonprofit organizations with no personal guarantee or collateral required. Funds may be used to help pay business payroll, utilities, and other operating expenses during the Covid-19 outbreak. We next study changes in PPP application rates by owner race/ethnicity from 2020 to 2021. In the following chart, we observe noticeably smaller decreases in application rates for Black- and Hispanic-owned businesses than for white-owned businesses. Indeed, the application rate for Black-owned businesses exceeded that of white-owned firms in 2021.

In addition, the SBA has published interim rules for loan forgiveness . Most importantly, to receive loan forgiveness, borrowers are required to use at least 60% of the loan forgiveness amount for payroll costs paid or incurred during the relevant “covered period” (and not more than 40% for non-payroll costs). Under the most recent law passed by Congress, a borrower’s covered period begins on the loan disbursement date and ends on any date that occurs between 8 weeks and 24 weeks after the disbursement date. A PPP loan is fully forgivableif the proceeds are used to pay payroll costs, including salaries and employee benefits, and certain other non-payroll costs. The CARES Act provides that if a PPP loan recipient utilizes the loan for payroll and other listed expenses, the loan may be forgiven in an amount equal to those costs.

The EZ form contains simplified calculations and reduced reporting requirements for eligible borrowers. In order to use the EZ form, borrowers must be able to certify that at least one of three scenarios apply, as set forth on the form. Staffing and pay levels must be maintained during the applicable covered period immediately following disbursement of the loan . 6.For example, the New York Forward Loan Fund is a state loan program for small businesses with 20 or fewer employees. Seventy-two percent of the program’s relief money ended up in the hands of those whose household income is in America’s top 20 percent, Dr. Autor’s group found. That’s because the relief effort’s shifting goals ultimately put less of a premium on worker pay. Ms. Kelly opened the store five years ago in what she calls a “food swamp,” an urban neighborhood where shops with fresh produce are scarce.

How Can I Use the Proceeds from My PPP Loan?

Please check with for the latest guidance on your forgiveness application window. For additional assistance with PPP loan forgiveness documentation, view our documentation guide. If your PPP loan is $150,000 or less, The Paycheck Protection you will apply for loan forgiveness online through Bank of America using the simplified SBA Form 3508S. Our decision to opt out of the SBA’s forgiveness portal will not impact the outcome of your forgiveness application.

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What is the deadline to apply for a PPP loan?

See funding solutions from 75+ nationwide lenders with a single application. And the rest is used for business rent, business utilities, mortgage interest on a business property, operations costs, property damage, supplier costs, or worker protection. Please note, if the cancellation is successful, you will not be able to reapply for another PPP loan through Square, and we cannot guarantee future SBA loan eligibility.

  • For an owner-employee that owns more than 5% of either an S corporation or a C corporation, retirement plan contributions attributed to the owner are allowable and count toward PPP loan forgiveness, up to 20.833% of the owner's retirement plan contribution amount in 2019.
  • An authorized representative of the applicant had to submit a Paycheck Protection Program Borrower Application Form , or lender equivalent form, and payroll documentation to an SBA participating lender.
  • Ms. Kelly is prepared to white-knuckle her way through the uncertainty.
  • The paper, co-authored by 10 economists, many of them attached to the Federal Reserve, analyzed data from the program, which Congress enacted in 2020 to alleviate the distress of business during the covid-19 pandemic.
  • If you are eligible to use Form 3508S, you won’t need to submit documents showing your eligibility for forgiveness with your forgiveness application.
  • Eligibility for PPP funding was extended to small business owners with non-fraud related felonies as long as the applicant was not incarcerated at the time of the application.

Furthermore, almost 71 percent of PPP borrowers chose not to report race/ethnicity information on their PPP applications, making it difficult to draw conclusions about PPP access for minority-owned businesses. To resolve these issues, we turn to data from the Federal Reserve’s 2021 Small Business Credit Survey, which contains detailed demographic information about the owners of small businesses. The intent of the Act is that SBA provide relief to America's small businesses expeditiously. This intent, along with the dramatic decrease in economic activity nationwide, provides good cause for SBA to dispense with the 30-day delayed effective date provided in the Administrative Procedure Act. Specifically, small businesses need to be informed on how to apply for a loan and the terms of the loan under section 1102 of the Act as soon as possible because the last day to apply for and receive a loan is June 30, 2020. The immediate effective date of this interim final rule will benefit small businesses so that they can immediately apply for the loan with a full understanding of loan terms and conditions.

5.Authorized by the CARES Act, these payments were made to eligible individuals as opposed to firms. However, the majority of small businesses at large and in our sample are nonemployer firms. Pass-through entities, such as sole proprietorships, report net income on their owners’ tax returns. If those tax returns used the business’s direct deposit information, the payments would have been deposited into the business checking accounts. In the weeks leading up to PPP loan disbursement, median balance growth was, perhaps surprisingly, positive. During these weeks, revenues and expenses were recovering but nevertheless lower than in the prior year. Despite this, median balance growth was positive starting approximately in April, 12 weeks before the PPP loan disbursement in July.

The PPP intended to get cash into the hands of small businesses quickly by streamlining the application process and leveraging infrastructure at financial institutions. Applications resumed on April 27, 2020 after an additional $310 billion was authorized. In our sample, the majority of firms with PPP loans received the funds in May, which was timely given the sharp revenue declines in April (Farrell, Wheat, and Mac, 2020a, 2020b; Opportunity Insights Economic Tracker, 2020). We used cash flow data to estimate the number of weeks of expenses the typical PPP loan could cover. Table 1 shows the median ratio of loan amount to the average weekly expenses in 2019 for the typical firm receiving a PPP loan in May.

A seasonal business divides by the average number of FTEs per month between February 15, 2019, and on June 30, 2019. If the business operates from an owned building, utilities are forgiveable up to the proportionate share of the utilities of the space that is not leased to other businesses.

Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein. However, you can’t apply for an SBA disaster loan for the same purpose as the Paycheck Protection Program. You need to declare that the uncertainty of current economic conditions makes the loan necessary for your business. To receive a SBA disaster loan you generally need to have no other source of credit. Current economic uncertainty makes the loan necessary to support your ongoing operations. If you are a sole proprietor or independent contractor without payroll and your net profit was over $100,000 in 2019 or 2020, this will also be capped at $100,000.

H.R.7010 – Paycheck Protection Program Flexibility Act of 2020116th Congress (2019-

Our findings suggest that changes made to the PPP in 2021 succeeded in increasing credit access for nonemployer firms. For minority-owned firms, these initiatives appear to have improved application take-up, particularly for Black-owned employer firms. However, approval rate gaps between white-owned and Black-/Hispanic-owned firms were not attenuated.

Other Programs

And because many businesses remained healthy enough to survive without the program, another analysis found, the looser rules meant the Paycheck Protection Program ended up subsidizing business owners more than their workers. We are hearing reports that entrepreneurs who own more than one business are having difficulty getting relief funding when their businesses don’t have cleanly separated finances. If you own more than one business, it’s important to get separate bookkeeping done for each business.

Property damage costs—any costs from damages due to public disturbances occurring in 2020 and not covered by insurance. The SBA itself doesn’t lend you the money, they just “back” the loan that the lender provides. You can check out the SBA’s Lender Match tool to find an eligible SBA 7 lender. If you or any employees had an annual salary over $100,000 in 2019 or 2020, you can only claim $100,000 . So if an employee makes $120,000, you would subtract $20,000 from their salary for the purpose of the PPP.

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