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What You Need to Know About the Paycheck Protection Program

March 16, 2021

The term “Paycheck Protection Program” may sound like you’re sending your paycheck into witness protection or guarding it against theft, but it’s actually a relief program intended for small businesses to continue paying their employees during the COVID-19 pandemic.

Countless people have lost their jobs since the pandemic began in March 2020, so the US government created the Paycheck Protection Program (PPP) as an addition to the CARES Act the following April. The government initiated a second round of funding in December 2020. Here’s what you need to know about the Paycheck Protection Program:

How Does the Paycheck Protection Program Work?

If you’re a small business owner who is on the verge of needing to layoff employees because the pandemic has impacted your cash flow, or you have already had to layoff employees and wish to hire them back, you can apply for a loan from the Paycheck Protection Program to continue paying your workers.

PPP loans are SBA loans, meaning the Small Business Administration backs them, and funds do not come from the government directly. You can visit the Paycheck Protection Program’s main website to match with a lender or find one in your local area.

According to the Paycheck Protection Program rules, the most significant condition of receiving a loan is that 60% must go toward payroll and providing employee benefits. You may use the other 40% for overhead costs, including mortgage, rent, and utility payments, as long as respective agreements were signed or services began before February 15th, 2020. Note that compensation for individual employees is capped at $100,000 annually.

Though the PPP provides loans with an interest rate of 1% and a two-year maturity rate, funds are not loaned to employees themselves. Business owners must apply to the program and meet eligibility requirements. If you are an employee, your employer should continue paying you as usual, and you will never owe anything back.

That said, pay cycles may not always align with bills, so if your employees need their pay, tell them they can use an app like Earnin to access their paycheck for hours already worked before their next payday.

Who is Eligible for the Paycheck Protection Program?

Almost all small businesses and sole proprietorships are eligible for the Paycheck Protection Program. Self-employed individuals may also be qualified. Keep in mind that the criteria sometimes changes, though — in February 2021, President Biden announced adjustments to the program in an effort to reach the smallest businesses, so only organizations with fewer than 20 employees were eligible between February 24th and March 9th, 2021.

There are also two loan types to be aware of: first and second draw. If you have not applied for a PPP loan since the program’s inception, then your loan would be “first draw.” If your business is still struggling and has experienced at least a 25% reduction in revenue, then you may be eligible for an additional loan, known as “second draw.”

Who is Eligible for Loan Forgiveness?

Are you worried about taking out a loan to pay your employees because you’re wary of loans in general? Don’t be — one of the best perks of the Paycheck Protection Program is that many of its loans are forgivable.

First and Second Draw loans are likely eligible for complete forgiveness if you:

  1. Apply for forgiveness within 24 weeks of signing for your loan.
  2. Maintain employee compensation levels.
  3. Spend proceeds as the PPP’s terms dictate (i.e., putting 60% toward payroll).

Keep a careful record of all your spending. You’ll need to prove you adhered to your loan’s terms when you contact your lender and apply for forgiveness. If you cannot verify your expenses or renege on any of the loan’s specifications (such as significantly reducing your employees’ wages), not all of the amount you borrowed will be forgiven. Should you fail to follow the terms or don’t apply for forgiveness, your loan will be due within two years.

Paycheck Protection Program Application Information

To apply for the PPP, visit the program’s website or fill out a First Draw Paycheck Protection Program application here.

For loan approval, you’ll need the following documentation:

  • Proof that you need the funds to pay your employees;
  • Verification that you will use the funds as the terms dictate;
  • Payroll and business expense information;
  • Payroll records;
  • Relevant tax filings;
  • Consent to receive the amount your lender calculates based on said tax documents;

And more. Hurry up and apply for the Paycheck Protection Program if you haven’t already — the program will only offer loans until March 31st, 2021.

Paycheck Protection Program loan terms are the same for everyone. If you operate a small business and need assistance keeping your workers employed during this uncertain economic time, then the PPP could provide you with necessary relief that won’t hurt you in the long run if you follow its guidelines and spend your funds wisely.


Photo by Richard Balog on Unsplash

Please note, the material collected in this blog is for informational purposes only and is not intended to be relied upon as or construed as advice regarding any specific circumstances. Nor is it an endorsement of any organization or Services.

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2Disclaimer: Balance Shield cash out is subject to your available earnings and daily pay period max. Other restrictions and/or third party fees may apply. For more information visit earnin.com/TOS.

3NO PURCHASE NECESSARY TO ENTER OR WIN. Must be 18 years of age or older and a legal resident of the U.S. or DC. Games begin each Sunday starting 12/6/20 at 9:01 p.m. ET and end the following Monday at 9:00 p.m. ET with the last Game ending 12/19/21. To download the App, view the Official Rules, odds disclosures, prize details, and alternate means of entry, visit https://www.earnin.com/wewin/. Void where prohibited. $10,000,000 grand prize payable over 29 years. Sponsor: Activehours, Inc. (d/b/a Earnin ®), 200 Portage Ave, Palo Alto, CA 94306.

4Disclaimer: Up to 2 days early is based on comparison with traditional banks. Exact timing is dependent on your employer's payroll policies. For more information on eligibility and requirements of Earnin Express, visit earnin.com/TOS.

5Source: Internal analysis conducted by Earnin on December 10, 2020.

1Restrictions on use of Services and/or third party fees may apply, see Earnin.com/ privacyandterms for details.

2Balance Shield cash out is subject to your available earnings and daily pay period max. Other restrictions and/or third party fees may apply. For more information visit Earnin.com/privacyandterms.

3Tip Yourself Account funds are held with Evolve Bank & Trust, Member FDIC and FDIC insured up to $250,000. Tip Yourself is a 0% APY and $0 monthly fee service. Other restrictions and/or third party fees may apply, see Earnin.com/privacyandterms for details.

1Lightning Speed may not be available to all Community Members. Cash Outs may take up to thirty minutes, actual transfer speeds will depend on your bank connection. Restrictions and/or third party fees may apply, see Earnin.com/TOS for details.

2Restrictions and/or third party fees may apply, see Earnin.com/TOS for details.

3Balance Shield cash out is subject to your available earnings and your daily pay period max. Other restrictions and/or third party fees may apply, see Earnin.com/TOS for details.

4NO PURCHASE NECESSARY TO ENTER OR WIN. Must be 18 years of age or older and a legal resident of the U.S. or DC. Games begin each Sunday starting 12/6/20 at 9:01 p.m. ET and end the following Monday at 9:00 p.m. ET with the last Game ending 12/19/21. To download the App, view the Official Rules, odds disclosures, prize details, and alternate means of entry, visit WeWin Game & Sweepstakes Official Rules. Void where prohibited. $10,000,000 grand prize payable over 29 years. Sponsor: Activehours, Inc. (d/b/a EarninⓇ), 200 Portage Ave, Palo Alto, CA 94306.

5Tip Yourself Account funds are held with Evolve Bank & Trust, Member FDIC and FDIC insured up to $250,000. Tip Yourself is a 0% Annual Percentage Yield and $0 monthly fee service. Your Tip Yourself Account and any Tip Jars are not Savings Accounts. For more information/details visit earnin.com/tos.

6Up to two days early is based on comparison with traditional banks. Exact timing is dependent on your employer’s payroll policies. For more information on eligibility and requirements of Earnin Express, visit earnin.com/tos.

7Your Max on Earnin Express is up to 80% of your payroll or $1000, whichever is less. The 80% is dependent on you routing your full paycheck to Earnin Express. For more information on eligibility and requirements of Earnin Express, visit earnin.com/TOS.

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1Disclaimer: Restrictions and/or third party fees may apply, see earnin.com/tos for more details. Lightning Speed may not be available to all Community Members. Cash Outs may take up to thirty minutes, actual transfer speeds will depend on your bank connection.

2Disclaimer: Lightning Speed may not be available to all Community Members. Cash Outs may take up to thirty minutes, actual transfer speeds will depend on your bank connection. Restrictions and/or third party fees may apply, see Earnin.com/TOS for details

3Disclaimer: Community Member must have had at least 1 successful debit with Earnin. Limit to 1 Max Boost per pay period. A boost will not adjust a Community member's daily max. Restrictions may apply, see earnin.com/tos for more details

*Disclaimer: Balance Shield cash out is subject toyour available earnings and daily pay period max.Other restrictions and/or thirdparty fees may apply. For more information visit earnin.com/TOS

1Restrictions may apply, see earnin.com/tos for more details. Tip Yourself Account funds are held with Evolve Bank & Trust, member FDIC and FDIC insured up to $250,000. Tip Yourself is a 0% Annual Percentage Yield and $0 monthly fee service. Your Tip Yourself Account and any Tip Jars are not Savings Accounts. For more information/details visit earnin.com/tos

2Disclaimer: NO PURCHASE NECESSARY TO ENTER OR WIN. Must be 18 years of age or older and a legal resident of the U.S. or DC. Games begin each Sunday starting 12/6/20 at 9:01 p.m. ET and end the following Monday at 9:00 p.m. ET with the last Game ending 12/19/21. To download the App, view the Official Rules, odds disclosures, prize details, and alternate means of entry, visit https://www.earnin.com/wewin/game-rules/. Void where prohibited. $10,000,000 grand prize payable over 29 years. Sponsor: Activehours, Inc. (d/b/a Earnin), 200 Portage Ave, Palo Alto, CA 94306.

3Disclaimer: Restrictions Apply. See earnin.com/tos for more information

*Disclaimer: Up to 2 days early is based on comparison with traditional banks. Exact timing is dependent on your employer's payroll policies. For more information on eligibility and requirements of Earnin Express, visit earnin.com/TOS.

**Disclaimer: Restrictions and/or third party fees may apply, see earnin.com/tos for more details. Lightning Speed may not be available to all Community Members. Cash Outs may take up to thirty minutes, actual transfer speeds will depend on your bank connection.

*(*) Internal analysis conducted by Earnin in January 2021, represents total users who Cashed Out at least once from January 1 to December 31, 2020.

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