Paycheck Protection Program (PPP) Under CARES Act


What you need to know.


PPP Loan Application Timeline

12.27.20 - the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act) was signed into law

1.06.2021 – SBA and Treasury released the Interim Final Rules for first and second draw PPP loans under the Economic Aid Act

1.08.2021 – SBA and Treasury released the Application forms

1.11.2021 - January 11th- 1st draw PPP borrowers can apply if using a community bank or non-bank lender

1.13.2021 - 2nd draw PPP borrowers can apply if using a community bank or non-bank lender

1.19.2021 - Applications accepted from all other participating lenders

1.25.2021 – Lenders can start to approve PPP loan increases for First Draw borrowers that need to reapply for or request an increase to their existing PPP loan

3.31.2021 – Deadline to apply for a PPP Loan

5.04.2021SBA is now only accepting PPP applications from CFIs (Community Development Financial Institutions) moving forward until May 31st.  Applications submitted by non-CFI lenders will no longer be accepted.

5.31.2021 – Extended Deadline to apply for a PPP loan (and SBA has until 6.30.2021 to process any PPP loans in queue)

7. 2021- PPP loans will automatically convert to a standard loan at 1% interest if borrower does not apply for forgiveness within 10 months of the end of the covered period under which required to spend the loan 



PPP Webinar - 1.19.21

Watch this recorded webinar to learn about the latest information we have on the Paycheck Protection Program (PPP).


BRIEF OVERVIEW of Paycheck Protection Program (PPP)

Funds may deplete quickly due to lenders’ improved technology and preparation for high volume, so we recommend applying ASAP. 

  • $284 billion approved in federally backed loans for small businesses.
  • Deadline to apply is March 31, 2021 or until funds exhausted
  • First Draw- refers to a borrower’s first PPP loan, whether taken in the initial 2020 round of funding or with this new 2021 wave
  • Second Draw- refers to smaller loans newly available to borrowers who have already taken and spent their 1st draw PPP loan

How to Apply

You can apply through FranFund’s PPP partner- The Loan Source via our link included below. If you are an existing or previous PPP borrower, you may want to apply with that PPP lender again for simplicity. Otherwise, you can use the link below. To avoid delays and issues, we HIGHLY recommend NOT applying to multiple lenders


  • Why The Loan Source?
    • Over $4.7 billion of PPP loans managed
    • The oldest non-bank, preferred SBA lender in the country
    • Cutting-edge technology streamlines applying and forgiveness
    • 100% focused on the PPP, not distracted by other activities
    • You don't need to be an existing customer to apply
    • NO minimum loan amount
  • Create an Account NOW to apply (can use mobile)
    • Will need EIN for business entity
  • The Loan Source will communicate with you directly, so be ready for a phone call or email. Direct any specific questions or follow-ups related to your PPP loan and its progress to The Loan Source



Here are the general terms as outlined in the new Economic Aid Act. Please note these are subject to change based on any additional SBA/Treasury guidance released

  • 1% interest rate
  • 5-year term
  • Loan payments will be deferred if you apply for loan forgiveness within 10 months of the end of your forgiveness covered period (will discuss later), until SBA sends or denies your loan forgiveness amount to the lender- Interest will accrue during while payment is deferred, but is forgivable
  • Waiver of affiliation rules for franchises that applied during CARES ACT
  • No personal guarantees
  • No collateral
  • No proof required that the recipient cannot obtain funds elsewhere
  • No SBA fees
  • No prepayment penalties

Borrowers may NOT take multiple loan draws to delay the start of their covered period


Who is Eligible?

For First Draw Loans

  • In operation on or before 2/15/2020
    • Small businesses
    • 501 (c)(3) non-profit organizations
    • Veterans organizations
    • Certain tribal business concerns
    • Eligible self-employed individuals
    • Independent contractors
    • Sole proprietorships
  • Must have had employees for which you paid salaries or payroll taxes
  • 500 or fewer employees (per physical location if a franchise)
  • Businesses in the accommodation and food services industry (NAICS72)
  • Franchises assigned a franchise identifier code by the SBA
  • Only one First Draw loan allowed per entity


For Loan Increases of Existing PPP Loans

Requests must be submitted on or before March 31, 2021 with the Lender that originally funded the loan, and will be subject to availability of funds. The following borrowers can request loan increases, as long as the loan isn’t forgiven yet:

      • Partnerships that received PPP loans that did not include any compensation for their partners
      • Seasonal employers whose loan calculation results in a higher loan amount based on new Act changes (can now choose avg total monthly payroll payments for any 12-week period selected, beginning 2.15.2019 and ending 2.15.2020)
      • Borrowers that returned the full loan amt before 12.27.2020
      • Borrowers that returned/paid part of the loan prior to 12.27.2020 can request an increase equal to the difference between the amount retained and amount approved
      • Borrowers that did not accept the full loan amt may request an increase up to the amt originally approved

Note that these increased amounts cannot exceed $10MM for individual borrowers or $20MM for a corporate group

For Second Draw Loans

  • In operation on or before 2/15/2020
  • Have used or will use the full amount of its first PPP loan (or increased loan)
  • 300 or fewer employees (per physical location)
  • Only one second draw PPP loan allowed per entity
  • Business shows at least a 25% reduction in gross receipts in 2020, calculated by comparing quarterly gross receipts for one quarter in 2020 with that same quarter in 2019
    • Ex: A borrower with gross receipts of $50k in Q2 2019 and gross receipts of $30k in Q2 2020 experienced a revenue reduction of 40% between quarters and is therefore eligible
    • If in operation all of 2019, you can also be deemed to have experienced this reduction if your business had a decrease in annual receipts of 25% or greater in 2020 compared to 2019 and you can verify via copies of annual tax forms
    • If NOT in operation all of 2019- see Page 21 of the IFR for specific guidance
      • An applicant not in business during the Q1 or Q2 of 2019 but was in business during Q3 or Q4 of 2019, can qualify if the borrower can demonstrate a 25% reduction in gross receipts in any quarter in 2020 as compared to the third or fourth quarter of 2019.
      • An applicant that was only in business during Q4 of 2019 can qualify if it experienced a 25% reduction in gross receipts in any quarter in 2020 as compared to Q4 of 2019.
    • If not in operation in 2019 but was by Feb. 15, 2020, can demonstrate this reduction between 1) Q1 of 2020 and 2) Q2, Q3, or Q4 of 2020


Who is Ineligible?
  • Businesses defined as ineligible in the SBA SOP (Chapter 3, A)
  • Business is permanently closed or in a bankruptcy proceeding
  • You are engaged in any activity that is illegal under federal, state, or local law
  • You are a household employer (individuals who employ household employees such as nannies or housekeepers)
  • Owner of 20% or more of the equity of the applicant is incarcerated, on probation, on parole; presently subject to indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony within the last five years
  • You, or any business owned or controlled by you or any of your owners, has ever obtained a direct or guaranteed loan from SBA or any other Federal agency that defaulted within the last 7 years and caused a loss to the government

Maximum Loan Amount

For First Draw Loans

  • Lesser of max loan amount of $10MM OR 5x the avg total monthly payroll costs during either (you choose):
    • 2019 CY
    • 2020 CY; or
    • the 1-year period before the date the loan is made
  • Aggregate eligible payroll costs from the chosen period for employees whose principal place of residence is in the U.S.
  • Subtract any compensation paid to an employee in excess of $100,000 on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred.
  • Divide this amount by 12 to get average monthly payroll costs
  • Multiply by 2.5
  • Add the outstanding amount of an EIDL made between Jan. 31, 2020 and April 3, 2020, that you seek to refinance, but do not include the amount of any EIDL loan advance
  • Additional special calculation methods and documentation requirements for individuals with self-employment income (with and without employees); seasonal employers; farmers and ranchers (with and without employees); and partnerships
  • Businesses that are part of a single corporate group (defined for this purpose as businesses that “are majority owned, directly or indirectly, by a common parent) in no event can receive more than $20MM


For Second Draw Loans

  • Lesser amount of $2MM or 2.5x avg monthly payroll costs during either (you choose):
    • 2019 CY
    • 2020 CY; or
    • the 1-year period before the date the loan is made
  • For borrowers in the Accommodation and Food Services sector (NAICS72), the max loan amount is 3.5x average monthly payroll costs up to $2 million.
  • Businesses that are part of a single corporate group- defined for this purpose as businesses that “are majority owned, directly or indirectly, by a common parent”, can NOT receive more than $4MM

Example of Loan Calculation for First and Second Draw Loans






  • Compensation to employees (whose principal place of residence is the U.S.) in the form of salary, wages, commissions, or similar compensation. Independent contractors do not count as employees for purposes of PPP loan calculations.
  • Cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, “a reasonable, good-faith employer estimate of such tips”)
  • Payment for vacation, parental, family, medical, or sick leave
  • Allowance for separation or dismissal
  • Payment for the provision of employee benefits consisting of group health care or group life, disability, vision, or dental insurance, including insurance premiums, and retirement
  • Payment of state and local taxes assessed on compensation of employees
  • For an independent contractor or sole proprietor, wages, commissions, income, or net earnings from self-employment, or similar compensation



  • Compensation to employees whose principal place of residence is outside the U.S.
  • “The compensation of an individual employee in excess of $100,000 on an annualized basis, as prorated for the period during which the payments are made or the obligation to make the payments is incurred”
  • Federal employment taxes imposed or withheld during the selected period, including both the employee’s and the employer’s share of FICA (Federal Insurance Contributions Act) and Railroad Retirement Act taxes, and income taxes required to be withheld from employees
  • Qualified sick and family leave wages for which a credit is allowed under Sections 7001 and 7003 of the March 2020 Families First Coronavirus Response Act (FFCRA)

What Can I Use The Loan Funds For?

  • Forgiven expenses paid via PPP loan shall be deductible for tax purposes (applies to past and future loans)
  • Permissible and forgivable expenses have been expanded and include:
    • Payroll costs (as defined above)
    • Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums
    • Mortgage interest payments (excluding prepayments or principal payments)
    • Rent payments
    • Utility payments
    • Interest payments on any other debt obligations that were incurred before Feb. 15, 2020
    • Covered expenditures for operations- Payment for any software, cloud computing, and other human resources and accounting needs
    • Covered property damage costs- Costs related to property damage due to public disturbances that occurred during 2020 that are not covered by insurance
    • Covered supplier costs- Payments to a supplier pursuant to a contract, purchase order, or order for goods that was in effect prior to taking out the loan and was essential to the recipient’s operations at the time at which the expenditure was made. Supplier costs of perishable goods can be made before or during the life of the loan.
    • Covered worker protection expenditure- Investments in personal protective equipment and other adaptive costs to help a loan recipient comply with federal health and safety guidelines or any equivalent State and local guidance related to COVID-19 during the period between March 1, 2020, and the end of the national emergency declaration.
    • Group insurance benefits can now be included in payroll cost calculation- group life, disability, vision and dental
    • Refinancing of SBA EIDL loans made between Jan. 31 and April 3 of 2020

*** Any PPP loans made before, on, or after this act are eligible to use the expanded forgivable expenses, unless their loans are already forgiven

  • Additional considerations regarding forgivable costs and forgiveness amounts include:
    • Individuals with self-employment income are subject to additional provided guidance on how loan proceeds can be used; see Page 52 of the IFR for information.
    • Loan proceeds cannot be used for lobbying activities or expenditures.
    • Payroll costs that are qualified wages considered in determining the CARES Act’sEmployee Retention Credit are not eligible for forgiveness.
    • Borrowers that also received an EIDL advance (aka grant) no longer need to subtract such advances from their PPP forgiveness, and SBA will no longer deduct those amounts from the forgiveness payment remitted to the PPP lender. “Any EIDL Advance Amounts previously deducted from a borrower’s forgiveness amount will be remitted to the lender, together with interest to the remittance date,” the IFR states.
  • Borrowers that are found to have used PPP funds for unauthorized purposes will have to repay those amounts, AND may also be subject to additional liability such as charges for fraud. Shareholders, members, and partners can face SBA recourse for any unauthorized use they commit.

Documents Needed

Applicants will be required to provide:


  • Revenue Reduction Support- financials and bank statements to help support this
  • Payroll Record - to confirm your business was in operation February 15, 2020
  • Business Documents- articles of incorporation and W9
  • Personal Information- owner(s) valid identification
  • Tax Returns & Statements- have these available in case needed
  • You will be required to make “good-faith certifications” that you’ve met the program’s requirements (outlined in application)
  • You must apply for loan forgiveness directly with your lender
  • We suggest opening a new bank account specifically for PPP funds to make all eligible payments from that account. It will simplify verification during the forgiveness application

Loan Forgiveness

Updated 1.19.21

  • The period for forgiven expenses will begin on the date of loan origination and end on a date of your choosing: between 8 and 24 weeks post origination:
    • The covered period is now defined as “the period beginning on the date the lender disburses the PPP loan and ending on any date selected by the borrower that occurs during the period (i) beginning on the date that is eight weeks after the date of disbursement and (ii) ending on the date that is 24 weeks after the date of disbursement.”
  • The loan will qualify for full loan forgiveness if during the 8-to-24-week covered period following loan disbursement:
    • Employee and compensation levels maintained (existing safe harbors on restoring FTE and salaries and wages are extended)
    • The loan proceeds are spent on payroll costs and other eligible expenses
    • At least 60 percent of the proceeds are spent on payroll costs (refinanced EIDL can be included)
  • Like original PPP loans, amount of forgiveness can be reduced if:
    • Borrower reduced # of employees
    • Borrower reduced salaries by more than 25