Overview of the Paycheck Protection Program

The Paycheck Protection Program is a federal, SBA loan program designed to help small businesses avoid laying off employees. It includes a mechanism to forgive the loan if it is used for payroll expenses.

  • You apply for the PPP loan through your bank.
  • You can apply for 2.5X 2019 payroll (or the amount you paid yourself if you are a single-member LLC/sole proprietor).
  • You can have up to the entire amount of the loan forgiven. 60% of the amount forgiven will have to have been spent on Payroll, the other 40% can go to other acceptable uses.
  • The amount not forgiven is a 1% loan payable over 5 years.

For more information check out these posts:


How much of the Paycheck Protection Program Loan is forgivable?

According to the Interim Final Rules as of April 10, 100% of the Paycheck Protection Program Loan is forgivable if the money is spent on payroll, rent, utilities or some loans.

Originally: 75% of the money must be spent on payroll and you cannot reduce employees or cut salaries for anyone earning under 100,000.

Now: 60% of the amount forgiven must have been spent on payroll.

How much money can I borrow through the Paycheck Protection Program

2.5 times average 2019 Payroll or for new companies average payroll from January 1 through February 29.


The program provides $510 billion for loans to small businesses.  It is based on the existing Small Business Administration’s (SBA) existing 7(a) program.

Through this program, eligible small businesses can obtain a loan to cover costs incurred over a 24 week, “covered period” in 2020. This was an 8 week period, but the Flexibility Act extended it to 24.

There has been a lot of talk about forgiveness of the loan, so note that in fact a portion of your loan may be forgiven:

Loan forgiveness is NOT automatic. After you spend the money you apply to the bank for forgiveness. Of the amount that is forgiven 60% must be spent on payroll and 40% on acceptable uses.

The bill defines “Payroll costs” as:

  • Salary, wages, commissions or similar compensation up to $100,000 annualized.
  • payment of cash tips or an equivalent.
  • payment for vacation, parental, family or sick leave.
  • allowances for dismissal or separation.
  • payments for group health care benefits, including insurance premiums.
  • payment of retirement benefits.
  • payment of state and local taxes assessed on employee compensation.
  • payments to sole proprietors or independent contractors who are compensated less than $100,000 in one year.

Payroll costs do not include:

  • Compensation above $100,000.
  • Compensation of employees who reside outside of the US.
  • Qualified sick or family leave wages for which a credit is available under the Families First Coronavirus Response Act.

Other acceptable uses of the loan are (these can make up 40% of the forgiven amount)

  • Rent
  • Mortgage interest
  • Utilities (Electricity


  • All of these obligations must have been in place by February 15 2020.
  • The government will reduce the forgivable amount of the loan if you reduce employee count and or reduce salary by more than 25%.
  • To be eligible for forgiveness you will have to support all of the expenses that you claim.  

Who qualifies:

  • Businesses, nonprofit organizations, and veterans’ organizations that employ no more than 500 employees or meet the size standard established by the Small Business Administration (SBA) for particular industries;
  • Sole proprietors, independent contractors, and “eligible self-employed individuals” as defined in the Families First Coronavirus Response Act.
  • An “eligible self-employed individual” is an individual who regularly carries on any trade or business and would be entitled to receive paid leave if the individual were an employee of an employer; and
  • Some hospitality and foodservice companies, those whose NAICS code begins with “72” qualify even if they have more than 500 employees.

How much can I borrow?

  • The maximum amount that you can borrow is 250% of your average MONTHLY payroll costs over the 12 months pior to the date of loan origination up to $10 million. 
  • “Payroll costs” include everything I mention above, but the compensation portion is capped at an annual $100,000 per individual.  (the 100,000 applies to the compensation portion, on top of that you can add the cost of health insurance, leave, etc).

What are the terms?

  • The loans will be offered through SBA 7A program lenders and will be guaranteed by the SBA.
  • There are no application fees or closing costs allowed and there is no collateral or personal guarantee required.
  • The interest rate is 1% and the maximum loan term is 5 years. There is a deferment of payments for at least six months and up to the SBA decision on forgiveness.

What if I already had to lay off some of my employees?

  • The program is intended to help you retain employees.  Reducing payroll by more than 25% will reduce forgiveness. Reducing staff can reduce forgiveness (Read the rules on FTE’s here)
  • If you did lay people off or reduce salaries, you can rehire them or repay the difference in salary before December 31.  You may not need to hire them back if your business was impacted by COVID.

When and how can I apply for a loan?

  • Apply through your bank.

How the Paycheck Protection Program works for sole proprietors

Just like businesses you will have to come up with your payroll. Here is how you do that.

The definition of “Payroll Costs” includes net earnings from self-employment. This is the amount reported on Line 31 on Form 1040 Schedule C of your individual tax return. You can add to that any separately stated 1099-MISC income that is subject to self-employment tax, but not reported on Form 1040 Schedule C.  

This includes income from any work or business activities, minus business deductions. For purposes of the loan calculation, net earnings are capped at $100,000.

Applicants can aggregate “Payroll Costs” from the2019 calendar year and divide by 12 to arrive at average monthly payroll.

If you operate a self-employed business and employ individuals, then we believe the total “Payroll Costs” should include both your average monthly gross wages of employees plus your net earnings from self-employment, all subject to the $100,000 limits per individual.

We believe you can also add health insurance premiums. These are not subject to the $100,000 limit so you can add them on even if income is above $100,000.

What supporting documentation is required?

The Interim Final Rule states that applicants:

“must also submit such documentation as is necessary to establish eligibility such as payroll processor records, payroll tax filings, or form 1099-MISC, or income and expenses from a sole proprietorship. For borrowers that do not have any such documentation, the borrower must provide other supporting documentation, such as bank records, sufficient to demonstrate the qualifying payroll amount.”

Ultimately this is left up to the banks and we have seen that each bank has slightly different requirements. At a minimum, we recommend having copies of your 2019 tax return (if filed), an income statement for 2019 or the last 12 months, 1099-MISC for yourself and payroll tax filings if you have employees.

If none of these are available, bank records may be sufficient, whatever you have to support your claim.

How much of the loan will be forgiven?

The rule states that in the 8-week period following the date that you received the money from the loan, 60% of the amount forgiven will have to have been spent on “Payroll Costs” and 40% can go to, mortgage interest payments, rent payments, utility payments, interest on other debt incurred before February 15, 2020.

To the extent that you spend the money on other things, that portion of the loan will not be forgiven. So be sure to keep good records.

The Treasury Department has not issued any guidance as to what would be included in the loan forgiveness calculation for self-employed businesses. 

Until they tell us differently, we recommend paying yourself 75% of the loan balance over the eight weeks and paying these forgivable costs with the rest.

What are the terms of the loan portion that is not forgiven?

The loan term is 5 years at a 1% interest rate. Payments are deferred for 6 months or longer see the flexibility act but interest will accrue during the deferral period. There is no prepayment penalty. No guarantee or collateral is required.

Jeff Coyle, CPA

Jeff Coyle, CPA, Partner of Rosenberg Chesnov, has been with the firm since 2015. He joined the firm after 20 years of business and accounting experience where he learned the value of accurate reporting, using financial information as a basis for good business decisions and the importance of accounting for management.

He is a diligent financial professional, able to manage the details and turn them into relevant business leading information. He has a strong financial background in construction, technology, consulting services and risk management. He also knows what it takes to create organizations having built teams, grown companies and designed processes for financial analysis and reporting.

His business experience includes:

Creating and preparing financial reporting, budgeting and forecasting.
Planning and preparation of GAAP and other basis financial statements.
Providing insight on financial results and providing advice based on those results.

Jeff also has a long history of helping individuals manage their taxes and plan their finances including:

Income tax planning and strategy.
Filing quarterly and annual taxes.
Audit support.
General financial and planning advice.
Prior to joining the firm in 2015, Jeff was in the private sector where he held senior financial and management positions including Controller and Chief Financial Officer. He has experience across industries, including construction, technology and professional services which gives him a deep understanding of business.

Jeff graduated from Montclair State University, he is a CPA and member of the American Institute of Certified Public Accountants, New York State Society of Certified Public Accountants and New Jersey State Society of Public Accountants.

Jody H. Chesnov, CPA

Jody H. Chesnov, CPA, Managing Partner of Rosenberg Chesnov, has been with the firm since 2004.  After a career of public accounting and general management, Jody knows the value of good financials.  Clarity, decision making, and strategy all start with the facts – Jody has been revealing the facts and turning them into good business results for more than three decades.

He takes a pragmatic approach to accounting, finance and business. His work has supported many companies on their path to growth, including helping them find investors, manage scaling and overcome hurdles.  His experience and passion for business reach beyond accounting and he helps businesses focus on what the numbers mean organizationally, operationally and financially.

He has a particular expertise in early-stage growth companies.  His strengths lie in cutting through the noise to come up with useful, out of the box, solutions that support clients in building their businesses and realizing their larger visions.

Prior to joining the firm in 2004, Jody was in the private sector where he held senior financial and management positions including General Manager, Chief Financial Officer and Controller.  He has experience across industries, which gives him a deep understanding of business.

Jody graduated with a BBA in Accounting from Baruch College, he is a CPA and member of the American Institute of Certified Public Accountants and New York State Society of Certified Public Accountants.

In addition to delivering above and beyond accounting results, Jody is a member of the NYSCPA’s Emerging Tech Entrepreneurial Committee (ETEC), Private Equity and Venture Capital Committee and Family Office Committee.  

He is an angel investor through the Westchester Angels, and has served as an advisor for many startup companies and as a mentor through the Founders Institute.

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