The pandemic was hard on individuals and businesses alike, but it particularly impacted small businesses. As a result, employees of such small enterprises suffered from lower wages or loss of pay. To help such small businesses in the USA cover their payroll costs, the U.S. Small Business Administration introduced the Paycheck Protection Program (PPP).
Under this program, eligible entities could avail of loans amounting to 2.5 times the average PPP salary costs, computed per the scheme's rules and guidelines. The deadline to avail of a loan under the Paycheck Protection Program was May 31, 2021.
The term ‘salary’ includes different components. In the Paycheck Protection Program context, PPP salary and payroll costs include the following types of expenses.
The maximum loan amount that a business or business owner can avail of under the Paycheck Protection Program is 2.5 times the PPP salary. While you can always use a PPP salary calculator to compute these costs, it helps to know the details of the computation.
Note: In case a business, an independent contractor or a sole proprietor had any outstanding Economic Injury Disaster Loan (EIDL) between January 31, 2020 and April 3, 2020, the sum should be added to the amount computed in step 4 above to identify the maximum amount that can be borrowed.
The loans granted under the Paycheck Protection Program made it easier for small businesses in the USA to meet their payroll costs. Similarly, the Indian financial landscape also has various loans and financing products to meet various funding requirements. You can get an instant loan directly to your Savings Account through the Fi Money app. If eligible, you can borrow up to ₹5 lakhs via a 100% paperless process.
The Paycheck Protection Program is a loan program introduced by the US federal government during the COVID-19 pandemic. It was intended to allow small businesses to apply for low-interest loans, so they could meet operational costs like payroll, utilities and other expenses.
The program itself does not impact the salary calculator for the employees of a business. However, the amount of loan an entity is eligible for under the program depends on the PPP salary or payroll computed as per the program’s regulations.
To calculate the PPP salary and determine the amount of loan a business is eligible for, the US government introduced certain guidelines and compliance requirements. Typically, you need to take the aggregate payroll costs for the last 12 months, subtract employee compensation exceeding an annual salary of $100,000 and divide the resulting number by 12 to get the average monthly PPP salary.
The eligible payroll components considered in PPP salary calculation include salary, wages, costs incurred on employees’ vacations, medical and sick leave, and all cash compensations paid to employees. The loan forgiveness criteria include the costs and expenses that the PPP loan proceeds are spent on and the percentage of the loan spent on payroll costs. The documentation requirements include payroll processing records, tax filings, Form 1099-MISC and bank records, among others.
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