top of page
  • Writer's pictureSophia Fang

How to Apply for the Paycheck Protection Program’s Small Business Loans

Updated: Jun 18, 2021

Graphic reads "How to Apply for the Paycheck Protection Program"

Passed on March 27, 2020, The Coronavirus Aid, Relief, and Economic Security (CARES) Act has allotted $350 billion in emergency loans to support small businesses impacted by COVID-19 through the Paycheck Protection Program. The new initiative will offer federally guaranteed loans at a low interest rate, much of which can also be forgivable.

If you’re a small business owner, this program can be an important resource to help you manage your payroll and retain your employees during the coronavirus (COVID-19).

Here at Honeycomb, we’ve been working hard to gather information about the program details and how small businesses in our community can apply for these loans.

Since the program is newly announced, we will be updating this blog post as more information comes in.

Loan Use

Small business loans from the Paycheck Protection Program should be used towards retaining employees, maintaining payroll, or making payments on your business’ rent, utilities, or lease.

It’s important to note that the loan forgiveness will be reduced if your business cuts employee headcount or salaries. If you have already cut employees as a result of the economic uncertainty, you have until June 30, 2020 to rehire staff.

How Much Can I Borrow?

Through the Paycheck Protection Program, your business can apply to borrow up to 2.5 times your average monthly payroll costs in 2019, up to $10 million.

The payroll costs include any payment to your employees, which includes: salary and wages (capped at $100,000 per employee), cash tips, paid time off, health insurance, retirement benefits, dismissal allowances, and state and local taxes related to employee compensation.

For a sole proprietor or independent contract, the payroll costs are calculated as the sum of wages, commissions, income, or net earnings from self-employment, capped at $100,000 per employee.

The interest rate on these loans is 0.5% at a fixed rate. The loan term is 2 years, with payment deferred for the first 6 months (interest will continue to accrue). There are no prepayment penalties on these loans, and there is no requirement for a personal guarantee or collateral.

Read more about the loan terms and requirements in the Treasury’s Paycheck Protection Program fact sheet.


Before we jump into the details of the application process, it’s important to figure out if your business is eligible to apply for the program.

The following groups are eligible for the Paycheck Protection Program:

  • Small Business with fewer than 500 employees (includes all full-time, part-time, and contract employees)

  • Small Business that meets the SBA size standard

  • Individual who is a sole proprietor, independent contractor, or self-employed

  • 501(c)(3) Nonprofit Organization with fewer than 500 employees (includes all full-time, part-time, and contract employees)

  • 501(c)(19) Veterans Organization that meets the SBA size standard

  • Tribal enterprise that meets the SBA size standard

Additionally, your business may qualify for the program if you’re a franchise operator or if you’re a business in the food services and accommodations industries with less than 500 employees per physical location.

You can read more about the qualifications in this handy guide created by the U.S. Department of Commerce and calculate your SBA size standard with this quick tool from the Small Business Administration.

How to Apply

If you’re interested in applying for the Paycheck Protection Program, you will need to apply through your bank or an approved SBA lender. As this is the case, it is likely that the documents needed for the application package may vary across banks.

Small businesses and sole proprietors can start applying for the Paycheck Protection Program on April 3, 2020. Independent contractors and self-employed individuals can start applying on April 10, 2020.

While applications are open until June 30, 2020, we highly encourage you to apply quickly, given the funding cap and the processing time of the applications.

To get a head start on applying, we recommend taking the following steps as soon as possible:

  1. Download and fill out the initial form from the CARES Act resource page by June 30, 2020

  2. Check in with your banker and ask for the preliminary guidelines

  3. Work with your bookkeeper and other service partners to starting putting together the documents that you need

  4. Figure out the maximum that you can borrow through this program

  5. Identify other funding sources to apply in conjunction to build your overall COVID-19 cash flow strategy

What to Prepare for Your Application

We reached out to our bank, PNC Bank, about their preparations for the program. The preliminary guidelines suggest that the following documents will be needed to apply for the Paycheck Protection Program as a small business:

  1. Your 2019 IRS Quarterly Forms 940, 941 or 944

  2. Last 12 months of Payroll Reports, beginning with your last payroll date and going backwards 12 months.

    1. Your payroll report must show the following:

      1. Gross wages for each employee, including the officer(s) if paid W-2 wages.

      2. Paid time off, vacation pay, and family medical leave pay for each employee

      3. State and Local taxes assessed on the employee’s compensation for each employee.

  3. 1099s for 2019 for independent contractors that would otherwise be an employee of your business (does not include 1099s for services).

  4. Document showing all health insurance premiums paid by the company owner under a group health plan, including all employees and the company owners themselves

  5. Document showing all retirement plan funding that was paid by the company owner to all employees and the company owners themselves (includes 401K plans, Simple IRA, SEP IRAs)

If you’re an independent contractor, sole proprietor, or self-employed individual, your bank will also be asking for a set of documents, which will likely include your payroll tax reports and Forms 1099-MISC. If you’re a sole proprietor, you will also be asked for your income and expense statements.

Again, make sure to reach out to your banker to get your customized checklist depending on your ownership structure and financial needs.

How should the Paycheck Protection Program fit into your COVID-19 cash flow strategy?

The Paycheck Protection Program can be a great resource to help your business and your employees stay strong through these times, but given the application timeline, it’s important to consider other funding options to piece together your overall COVID cash flow strategy, such as state relief programs or a community-sourced crowdfunding campaign.

As you explore different options, make sure to keep in mind the timeline to the point where you can feasibly get access to the funds. We encourage you to apply to a blend of short-term, medium-term, and long-term funding opportunities.

The great news is that the documents needed to apply for the Paycheck Protection Program are likely to overlap with the application documents of other funding opportunities. If you’re already doing the full work of putting together this application, it shouldn’t take too much additional heavy lifting to apply to other programs in conjunction with this one, such as state relief programs or a community-sourced crowdfunding campaign.

Keep Your Business Strong

Want to learn more about structuring your COVID-19 relief plan or boosting your community support with a Honeycomb crowdfunded relief loan?

Schedule a meeting with one of our small business experts now.


bottom of page