Paycheck Protection Program Loan

and

Forgiveness Calculator

Use this PPP calculator to estimate how much you may qualify for with a PPP loan.

Hatch does not offer the PPP loan. This tool is meant for information purposes only.

Tell us about your business:

Total cost of salary, wages, and commissions for 2019?

$

Total cost of vacation, medical, and other leave for 2019?

$

Total cost of health care, insurance, and benefits for 2019?

$

Outstanding balance if you have an EIDL Loan between 1/31/20 and 4/3/20?

$

This calculator is a tool created by Hatch Credit, Inc. to provide estimated maximum loan amounts and maximum forgivable amounts for PPP Loans. The calculator is meant to be used for information purposes only, and we recommend for you to work with a licensed SBA lender to determine specific amounts for your unique situation and PPP loan. The SBA continues to provide guidance on the rapidly developing COVID-19 pandemic, and we will do our best to keep this calculator up to date as the situation evolves.

FAQ

Applying for a PPP Loan

About Hatch
At Hatch, we extend a line of credit (up to $5,000) to business owners, without requiring a previous business history or a great credit score. Hatch does not offer the PPP loan and gets no referral or other fees from this program. However, we understand that a program this large can be confusing without the help of a team of experts.

Our team considers PPP loans a great deal for small businesses that are interested in taking out a loan, with minimal personal risk for corporations or LLCs. If your business is not a corporation or LLC, then you need to decide whether the low APR is worth the personal risk if you default on the loan.
What is the PPP?
The Paycheck Protection Program (PPP) was established under The CARES Act. The loan program is designed to help small businesses that have been affected by the COVID-19 pandemic. This government program is for small business owners to retain their employees by offering a loan of up to $10 million to cover payroll, and other operational expenses (such as rent and utilities) over an 8 week period between February 15, 2020, and June 30, 2020.

The loan is mainly meant for payroll and employee related costs such as health insurance, certain types of paid leave, retirement benefit obligations, etc., and are eligible for forgiveness.

Any amount spent on rent, mortgages, and utilities in excess of 25% of the total loan would not qualify for PPP forgiveness. More on loan forgiveness in our sections below.
What are the PPP loan terms?
The PPP loan is a fixed 1% APR loan with a 2-year term, with no payment due in the first six months. There are no prepayment penalties, meaning you can repay the loan at any time before the maturity date, and PPP loans are 100% guaranteed by the SBA with no personal guarantees, collateral, or credit checks required.

All loans will be processed by third-party lenders permitted by the SBA, and lenders are not allowed to collect fees from you or be paid out of the PPP loan proceeds.
What if my bank isn’t accepting applications?
For a complete directory of all banks accepting PPP applications, you can search the SBA’s directory here.

‍If you don’t currently have any business financing through a bank, or your bank is not yet accepting applications, it’s worth checking in with your current payroll or payments processor. For example, companies like Square, PayPal, and Intuit have been accepting applications. Other, smaller processing companies may have the ability to service applications, but are only offering them to their current customers. It’s worth asking your payments processor or payroll provider if they have an application available for you.

Even if your partner financial companies can’t process your application directly, they can likely help you generate the payroll or income reports you need, saving you time wherever you apply. So definitely check in with them before you fill out your loan application.
How do I calculate my maximum PPP loan amount?
Our handy calculator above will provide the calculations for you, but we highly suggest referencing the SBA’s instructions on calculating and applying for a loan. However, to best summarize the calculation here:
  • Step 1: Aggregate payroll costs from the last twelve months* for employees whose principal place of residence is the United States.
  • Step 2: Subtract/exclude compensation paid to employees in excess of an annual salary of $100k/yr and/or any amounts paid to independent contractors or sole proprietors.
  • Step 3: Divide the amount by 12 to get your average monthly payroll costs:
    • If your business is seasonal, you divide by 3 (or 4.5) to get your average monthly payroll cost. If you are a new business (that did not operate in 2019), divide by 2 to get your average monthly payroll costs. See the next section on why.
  • Step 4: Take your average monthly payroll costs and multiply by 2.5.
  • Step 5: Add any outstanding amount of an Economic Injury Disaster Loan (EIDL) made between January 31, 2020 and April 3, 2020, minus the amount of any “advance” under an COVID-19 EIDL (since advances don’t have to be repaid); and your total will be your max PPP loan amount.
Examples of PPP loan calculations
Example 1: No employees make more than $100,000
  • Annual payroll: $240,000
  • Average monthly payroll (divide by 12): $20,000
  • Multiply by 2.5 = $50,000 = maximum PPP loan


Example 2: Some employees make more than $100,000
  • Annual payroll for 2019: $260,000
  • Subtract salaries in excess of $100k/yr: $20,000
  • Adjusted annual payroll: $240,000
  • Average adjusted monthly payroll (divide by 12): $20,000
  • Multiply by 2.5 = $50,000 = maximum PPP loan


Example 3: No employees make more than $100,000, outstanding EIDL loan of $10,000
  • Annual Payroll for 2019: $240,000
  • Average monthly payroll (divide by 12): $20,000
  • Multiply by 2.5 = $50,000
  • Add EIDL loan of $10,000 = $60,000 = maximum PPP loan
Can I apply for a PPP loan if I already have an EIDL loan?
You can qualify for a PPP loan in addition to other SBA loans such as the Economic Injury and Disaster Loan (EIDL) or an SBA 7(a) loan, but it’s important to keep in mind that funds can’t be used for the same intended purpose as another SBA loan. For example, if you’ve already filed for an EIDL loan to cover your rent payments, you can’t apply for a PPP loan to cover the same rent payments. EIDL loan amounts must be declared at the time of your PPP loan application.
Short list of links and resources
Before we dive into the full details of the program, here is a short list of the most important resources for the Paycheck Protection Program, direct from the Small Business Association (SBA) and SBA.gov.

Who is eligible for a PPP loan?
Full details are here, but eligible small businesses and nonprofits must fit one the following criteria:
  • Businesses must have < 500 employees in the U.S. (with exceptions for businesses with > 1500 employees at SBA.gov
  • 501(c)(3) nonprofits that have < 500 employees, who principally reside in the U.S.
  • 501(c)(19) Veterans Organizations that meet SBA size requirements
  • Tribal businesses that meet SBA size requirements
  • Small businesses with a maximum net worth of up to $15MM and average net income for two full fiscal years prior to application that does not exceed $5MM.
  • Sole proprietors, independent contractors, or self-employed business owners
How do I apply for a PPP loan?
The PPP application is a standard form, and all applicants, regardless of what bank processes them, are all sent to the SBA for approval. A wide variety of banks, lenders, and Fintech startups are accepting PPP applications (here’s a list of licensed banks), but some may be more ideal servicers for you than others.

In our opinion, the fastest way to get a PPP loan is to apply through your current bank. Applications take time to process and working with a smaller, regional bank that you’ve already worked with (has your information on file) may be able to process your application faster.

Regardless of who you work with, lenders are legally required to put applicants through a process known as Know Your Customer/Know Your Business (KYC/KYB). If you already have active financing through a bank who knows you and your business, they likely won’t have to repeat these processes, and can get your application moving sooner.
What documents and information do I need to apply?
Once you find an approved lender, you will need to provide them with specific figures for payroll and other approved expenses listed below, and be prepared to provide supporting evidence and documentation as proof of your calculations.

Documentation will vary depending on your lender, but here is a list of common documents being requested by lenders.

  • Business information – legal name, address, FEIN, NAICS code
  • Company information (if not a sole proprietorship) – percent ownership, name, contact information, articles of incorporation
  • Personal information (if you are a sole proprietor) – 2019 personal income tax returns including Schedule C and 2019 1099s you received if you are an independent contractor
  • Payroll statements that show salaries and other eligible payroll costs like employer portion retirement contributions, sick pay and vacation pay
  • Health Insurance costs if not listed on payroll statements
  • IRS forms 940 and/or 941’s – a 941 is the quarterly wage and tax form reported by your payroll provider to the federal government, a 940 is the annual filing of the same information. Some lenders are asking for only the 940, others for the 940 plus the four quarterly 941’s.
  • IRS form 944 – Equivalent to a 940 but for those whose federal withholdings are less than $1,000. Everyone with payroll has 941’s but you will either have a 940 or a 944, but not both.
  • IRS form W3 – this is the annual summary statement of all of the W-2s that were issued to your employees and the total amount paid in payroll and taxes in a calendar year.
  • State tax filings – Some institutions are asking for State employee tax filings as well as federal forms. For example, in California these would be CA EDD forms DE-9 and DE-9c These are issued on a quarterly basis like your 941s but there is no annual filing. You should have four of these per calendar year.
How do I calculate my maximum PPP loan if I am a seasonal or new business (that was not operating in 2019)?
If your business is seasonal, you are allowed to choose which date range is best/most accurate for your business. Either March 01, 2019 to June 30, 2019 (3 months), or February 15, 2019 to June 30, 2019 (4 ½ months). You would add up all your costs, and divide by either 3 (or 4.5) to get your average monthly costs, then multiply by 2.5 for your maximum PPP loan amount.

If your business is new and was not operating in 2019, you will need to use your payroll information from January 01, 2020 to February 29, 2020. In this case, you would add up all your costs, and divide by 2 to get your average monthly costs, then multiply by 2.5 for your maximum PPP loan amount.
What is considered a “payroll” cost?
Payroll costs consist of compensation to employees (whose principal place of residence is the U.S.). In our calculator above, we’ve split these payroll costs into three, easy to remember buckets:
  1. Pay & taxes: Salaries, wages, commissions, or similar compensation; 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), and payment of local or state taxes assessed on employee compensation.
  2. Paid leave: Payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal
  3. Benefits: Payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums
If you are applying as an independent contractor or sole proprietor, payroll costs consist of wage, commissions, income, or net earnings from self-employment or similar compensation.
I am a 1099 recipient (independent contractor) or a sole proprietor. How do I apply for a PPP loan?
Once you’ve chosen a PPP eligible lender to apply with, you will need to complete the PPP loan application and submit it to your lender by June 30, 2020. The sooner, the better. Required documentation will vary by lender, but it’s a good idea to have the following documents ready when you apply:
  • Schedule C (for self-employed or salaried individuals)
  • 1099-MISC or Schedule C (for independent contractors)
  • Income and expense reports for 2019
  • ID Verification: color copy of a government-issued ID (front & back), for all owners listed on the application.
Important note: As of 5/17/20, there is still limited guidance from the SBA around individual health insurance premiums for self employed individuals. Please work with your lender on how/if to include these costs into your calculations when applying.

Applying for PPP Forgiveness

What should I know about PPP loan forgiveness?
The federal government is continuing to provide guidance on the requirements to have your loan forgiven. PPP loans (the full principal amount and any accrued interest) may be forgiven, meaning they do not have to be repaid. However, you must meet the following requirements:

  • You must apply for forgiveness, which you can do directly with your lender, as they are required to process forgiveness requests within 60 days.
  • You must use the PPP loan for payroll and other acceptable expenses (rent, interest on covered mortgages, utilities) that occur for 8 weeks after you get your PPP loan.
  • You must maintain your number of Full Time Equivalent (FTE) employees (or rehire them by June 30, 2020).
  • You must maintain 75% of the salary or wages for FTEs that make less than $100k/yr. Otherwise, your loan forgiveness will be reduced in proportion with your salary and wage decreases.
What if I can’t maintain my Full Time Equivalent (FTEs) or reduce my FTE salaries below 75%?
For each employee, you must maintain salary or wages (under $100K/yr per employee) to within 75% of the total before the covered period. In other words, If the crisis requires you to have to reduce employee salaries/wages by more than 25%, your forgiveness amount will be proportionally reduced by the amount in excess of 25%.

Caveat: if you reduced your FTE employee levels between Feb 15, 2020 and April 26, 2020, and then restored those levels back to your pre-February 15th levels by June 30, 2020, you may be exempt from a loan forgiveness reduction.

We are still waiting on final guidance from the SBA on how this will be implemented, but details are provided here at SBA.gov.
How do I calculate PPP loan forgiveness?
Our calculator above will provide the calculations for you, but we highly suggest referencing the SBA’s instructions on calculating and applying for loan forgiveness. Here’s a quick summary on what goes into calculating loan forgiveness:
  • Step 1: Take your payroll costs you will incur during the 8 weeks after you receive your PPP loan, which may include wages, salary, cash tips, commissions, retirement benefits, health insurance and/or sick pay, PTO, and employer assessed State and local taxes (remember to cap compensation earnings at $100K/yr for FTEs).
  • Step 2: Take other forgivable costs (rent, utilities, and/or interest paid on covered mortgages) that you will incur during the 8 weeks after you receive your PPP loan. Important: loan forgiveness is capped at 25% for these forgivable costs, and must have been in place on or before February 15, 2020.
  • Step 3: Your total loan forgiveness amount will be the total of these estimated costs.
Example of PPP loan forgiveness calculations
As an example, let’s say you were approved for a PPP loan of $25,000.

When applying for forgiveness, you estimate 8 weeks worth of payroll costs to be $10,000, and forgivable expenses (rent, utilities, and covered mortgage interest costs) of $7,000.

In this case, your total loan forgiveness would be $16,250 and not $17,000, and your expected amount to be repaid would be $8,750. This is because forgivable expenses (rent, utilities, mortgage interest) may not exceed 25% of your total loan amount, which in this case, is $6,250.

This also assumes that you’ve maintained at least 75% of the salary or wages for FTEs (less than $100K/yr) or have plans to rehire your staff by June 30, 2020 in order to be exempt from reducing your loan forgiveness.
When does the clock start for my 8 week loan forgiveness period?
The 8 week period starts when the lender sends your first PPP loan disbursement, and you are expected to use the loan during this period. This will vary depending on when the loan is approved and acted upon by the borrower.
Due to COVID-19, I won’t be able to re-hire all my employees. Should I still consider the PPP loan?
From what we’ve seen, the forgiveness portion of the PPP has been the most challenging part for small business owners to navigate with the program, especially with so much uncertainty around if small businesses will have the capacity or need to maintain a majority of their staff during the COVID-19 crisis.

However, the PPP loan is still a great deal for small business owners, even without forgiveness. Consider: where else can you get a 1% fixed APR loan with a two year term, without personal guarantee or collateral requirements?

Interest rates and fees should be carefully considered for any loan product, but a 1% APR loan is practically “free” in the lending space. For example, on a $10,000 PPP loan, you’d pay about $150 of interest at the end of two years, which means if you end up not needing the loan, you’ll be out $150.
What does the SBA consider as utilities for loan forgiveness?
Utilities are expenses that you will incur during the 8 weeks after receiving your PPP loan. Eligible utilities include electricity, gas, water, telephone, internet access, or fuel costs for business transportation. Utility agreements must be in place on or before February 15, 2020.