How to Bulletproof Your Paycheck Protection Program Loan Application

SBA Loan

Recent legislation known as the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) created the Paycheck Protection Program, which allows small businesses to apply for loans at banks and credit unions that are guaranteed by the Small Business Administration (SBA). The purpose of this E-Brief is to (1) outline practical considerations when seeking to apply for a loan under the new program, (2) clarify the calculation of payroll costs used to determine your loan amount; and (3) provide a checklist of documents your business may need to complete the application and expedite the loan underwriting and closing process.

Eligibility:  The Paycheck Protection Program is generally limited to businesses with 500 or fewer employees unless otherwise qualified as a small business concern under the SBA loan program.  Lodging and food businesses also have a per location exception and thus, a food or lodging business with more than 500 employees may still qualify depending upon its per location employee totals.

Timing:  The SBA is required to issue regulations within 15 days of the enactment of the CARES Act, therefore, it is possible that lenders could begin taking loan applications as soon as mid-April.  In the meantime, the following information is intended to better prepare your business for the loan application and approval process.

Know What Payroll Costs to Include or Exclude:  The maximum loan amount for each business generally depends on the business’ “average total monthly payroll costs.”  The following chart breaks down the costs to include or exclude in that determination based upon the statutory definition of “payroll costs”:



Do not include:

Eligible Employees and Compensation

Compensation for full-time and part-time employees

Compensation for independent contractors*

Salaries, wages, commissions, and similar compensation (including tips or cash equivalents)

Compensation for owners of the business (e.g., shareholders, members, or partners)***


Compensation of an employee who does not reside in the U.S.


Compensation of an employee in excess of an annual salary of $100,000 (i.e. limited to $8,333 per month)




Other Benefits

Allowance for dismissal or separation



Payment required for providing group health care benefits (including insurance premiums)



Retirement benefits






Employer-portion of the payment of state or local tax assessed on employee compensation

Employment taxes imposed for federal insurance contributions, railroad retirement, and income taxes on wages (i.e. federal withholdings)




Family or Sick Leave Wages

Payment of vacation, parental, family, medical, or sick leave

Qualified paid sick leave wages for which a tax credit is already allowed under the Families First Coronavirus Response Act (FFCRA)

Qualified paid family leave wages for which a tax credit is already allowed under the FFCRA




Time Period


Payments less than 1 year from the date of the loan application**

Payments older than 1 year from the date of the loan application




Other Expenses

Payroll expenses only (as outlined above)

Payments on mortgage



* Sole proprietors and independent contractors can apply separately for a loan under the Paycheck Protection Program.

** Time period may also be further adjusted if (a) the business qualifies as a “seasonal business” under the program (average payroll costs determined either beginning on February 15, 2019 or March 1, 2019 and running to June 30, 2019) or (b) the business did not exist during the period of February 15, 2019 to June 30, 2019 (average payroll costs computed beginning on January 1, 2020 and running to February 29, 2020).

*** Until the SBA issues further guidance, it is unclear whether owners who are also “employees” can be included in this calculation.

To clarify, there are some costs that cannot be used in the calculation above but may be permitted expenses once the loan is approved and funded.  Generally, the proceeds from the loan can be used for any of the following costs incurred, so long as the obligation existed prior to February 15, 2020:

  1. Payroll;
  2. Payments on mortgage (interest only);
  3. Rent;
  4. Utilities; and
  5. Interest payments on other debt (e.g., corporate or partnership debt).

The maximum loan amount under the Payroll Protection Program is equivalent to the lesser of: (1) 250% of the business’ average monthly payroll costs, as outlined above, or (2) $10 million. *NOTE: Please see updated information below. 

Research Lenders and Credit Unions:  Some lenders and credit unions may give priority to existing customers.  If your business does not have a current lending relationship with an SBA lender, you should begin researching options available in your area.  Lists of the top SBA lenders in Nebraska and Colorado are available at: and, respectively.

Checklist:  Download the checklist available below to ensure the business has everything the lender may ask for to complete the application and anticipate what may be required by the lender prior to loan closing:

Click here to view Checklist for Paycheck Protection Program Loan Application

Loan Forgiveness:  A separate application is required if a business seeks to have the indebtedness on a covered loan forgiven.  This topic will be covered by a separate publication at a later date.

Update March 3/31/2020: The U.S. Treasury issued additional guidance for the Paycheck Protection Program and published the form Application to be used. Those materials are available on its website at:  Please visit that website for the most up-to-date information; however, we still anticipate regulations to be issued by the Small Business Administration in the next few days.

If you have any questions on this topic or need assistance, please contact our Business Services, Financial Institutions, Real Estate, Construction, or Labor & Employment Practice Groups.  We encourage you to subscribe to our E-Briefs for the latest news, tips, and updates. 

Woods Aitken recently launched a coronavirus resource page that includes valuable information regarding the coronavirus pandemic and all of our recent publications on COVID-19. We encourage you to visit this page often for updates.