Paycheck Protection Program FAQ

The Paycheck Protection Program (PPP) is administered by the federal Small Business Administration (SBA) and provides COVID-19 relief funding to small businesses as well as individuals who are self-employed or are independent contractors if they meet program size standards.

A PPP loan is designed to provide a direct incentive for small businesses to keep their workers on the payroll. PPP loans are eligible for full or partial forgiveness if the money is used for qualifying costs including payroll, rent, mortgage interest, utilities, worker protection, supplier costs, operations costs and property damage costs.

You may apply for PPP funding through Square Capital, but Square Capital, like all PPP lenders, plays no role in determining PPP requirements. All PPP requirements and guidelines are determined by the SBA. You are welcome to apply for PPP funds through Square Capital or any other approved PPP lender. Should you apply for and be approved for a PPP from Square Capital, Square Capital LLC will both issue and service your loan.

PPP funding through Square Capital has no relation to Square Capital’s
regular lending program.

At this time, only businesses with a Square account will be able to apply through Square Capital. Sole proprietors, independent contractors, self-employed persons, and small businesses can apply. We are currently rolling out applications to sellers that receive the first PPP loan through Square Capital. You may be eligible for your second PPP loan if your business:

Received a first PPP loan through Square Capital
Used or will use the full amount of their first PPP loan
Has fewer than 300 employees. If your business is a hotel or restaurant, you must have fewer than 300 employees per location
Experienced at least a 25% decrease in revenue in a quarter in 2020 relative to a quarter in 2019 or during the year 2020 as compared to 2019.

We expect to roll out applications to sellers applying for their first PPP loan through Square Capital in March.

Yes. PPP is available to sole proprietorships, independent contractors, and self-employed individuals, as well as gig workers. For these individuals, annual business net profit up to $100,000 can be counted as payroll costs.

We don’t recommend applying at multiple lenders, as it may impact your loan approval or future forgiveness.

Yes, businesses with non-U.S. beneficial ownership are eligible for PPP loans; however, they must provide additional documentation to be approved. Please note, if you are a business owner with undocumented immigration status, you are not eligible for a PPP loan.

Yes. If you have an active or prior loan through Square Capital, you can apply for a PPP loan through Square Capital if you meet PPP eligibility requirements. However, previous approval for a loan through Square Capital does not guarantee approval for a PPP loan through Square Capital.

If you have an active loan through Square Capital and are approved for a PPP loan through Square Capital, your PPP loan will not be used to automatically repay your active loan through Square Capital. Repayment for both loans will be separate. Your active loan through Square Capital will be automatically repaid via a percentage of sales made through Square. In addition, you may also make additional, voluntary prepayments in your Square Dashboard. Your PPP loan will be repaid via monthly automatic debits from your linked bank account after the deferral period, if your PPP loan is not forgiven.

Employees are part-time, hourly, or full-time staff for whom you file a W-2. Independent contractors and self-employed individuals for whom you file a 1099 are not considered employees.

The SBA has issued specific instructions for how all PPP lenders must calculate the loan amount.

If this is your second PPP loan, and your business is not a restaurant or hotel, the PPP loan amount will be equal to your verified average monthly payroll on file from your PPP loan application (excluding payroll costs over $100,000) x 2.5. For businesses that are restaurants or hotels, the PPP loan amount will be equal to your verified average monthly payroll on file from your first PPP loan application (excluding payroll costs over $100,000) x 3.5.

No. There is no personal guarantee requirement for a PPP loan.

Payroll costs, as defined by the SBA, consist of:

• Compensation to employees (whose principal place of residence is the United States) in the form of salary, 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)
• 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 coverage, 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, wage, commissions, income, or net earnings from self-employment or similar compensation

The SBA has determined the following do not qualify as payroll costs. You should therefore not count them towards your average monthly payroll, nor should you use PPP funds to cover these expenses.

• Any compensation of an employee whose principal place of residence is outside of the United States
• The compensation of an individual employee in excess of an annual salary of $100,000, prorated as necessary
• Federal employment taxes imposed or withheld during the applicable period, including the employee’s and 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 Families First Coronavirus Response Act (Public Law 116–127)

While you must use at least 60% of PPP funds to cover qualifying payroll costs, the remainder also be used to cover the following non-payroll costs:

• Employee benefits (healthcare and retirement benefits)
• Mortgage interest payments (not including payments on the mortgage principal)
• Operations costs (software or cloud computing service)
• Rent
• Utilities
• Property damage caused by public disturbances in 2020
• Supplier costs
• Worker protection expenses (masks, plexiglass shields, gloves, and more)

Your PPP loan can be used to pay for the following qualifying payroll costs and non-payroll costs to qualify for forgiveness:

• Payroll costs such as salary, wages, commission, tips
• Employee benefits (healthcare and retirement benefits)
• Mortgage interest payments (not including payments on the mortgage principal)
• Operations costs (software or cloud computing service)
• Rent
• Utilities
• Property damage caused by public disturbances in 2020
• Supplier costs
• Worker protection expenses (masks, plexiglass shields, gloves, and more)

If you do not use PPP for these purposes, your PPP loan will not be forgiven and you will be required to pay back the loan. Businesses have up to 24 weeks from the date you received the loan to spend the funds and be eligible for loan forgiveness.

If your loan is now serviced by the SBA, you can still file for forgiveness through Square if you haven’t already. However, all other questions about your loan should be directed to the SBA.

To make a payment or ask questions about your loan servicing, please contact the SBA at 1(800) 827-5722.

You can apply for your second PPP loan through Square Capital using the verified payroll information and documents provided with your first PPP application. However, you may need to upload an updated 2019 1040 Schedule C if you filed a different version with the IRS .

When applying for your second PPP loan, you should also be prepared to show that your business has experienced at least a 25% decrease in revenue in a quarter in 2020 relative to a quarter in 2019 OR in the year 2020 as compared to 2019. If your loan is less than $150,000 you will not need to provide documentation demonstrating your business’ revenue decline with your loan application; however, you will need to provide documentation showing the revenue decline by the time you apply for forgiveness.

All businesses will also be required to verify their personal and business information with the following documentation, if so requested:

Personal information

• Social Security Card
• Government issued I.D.

Business information

• Your business’s government issued SS-4 (EIN confirmation letter); or
• Your most recent business tax returns confirming your business name and TIN; or
• If you are a sole proprietor, your business name is the same as your first and last name and your TIN will be your Social Security number. Some sole proprietors may also register DBA (doing-business-as) names. If you have a DBA, you’ll be asked to provide it in the application. Find out your business entity type by taking a look at your tax returns.

We will work to process your application as fast as we can. Processing times can depend on PPP application volume, internal SBA systems, and the completeness of all documentation you submit to support your loan application. No need to contact Square Capital, we will notify you through email and your Square Dashboard as the status of your application changes.

As of March 30, 2021, the second round of the PPP program is set to expire on May 31, 2021.

You can cancel your PPP application until it gets verified by Square Capital.

To cancel your application:

1. Navigate to the Capital Tab of your Square Dashboard.
2. Click View details on your PPP loan.
3. Click the three dots on the top right corner of your Application details.
4. Click on Cancel loan request.
   Confirm cancelation by clicking on Yes, cancel loan request.

You can cancel your loan within the 2 business days of the date of loan listed on the agreement, by the end of the second business day. To cancel your loan:

1. Navigate to the Capital Tab of your Square Dashboard.
2. Click View details on your PPP loan.
3. Click the three dots on the top right corner of your Loan details.
4. Click on Cancel loan.
5. Confirm cancelation by clicking on Yes, cancel loan.

Please note, if the cancellation is successful, you will not be able to reapply for another PPP loan through Square, and we cannot guarantee future SBA loan eligibility. There may also be some delays with the SBA enabling you to be approved elsewhere again, even if you are eligible to apply with another lender after cancelling with Square.

If the PPP loans funds have been sent to the bank account on file, Square Capital, LLC will initiate a debit for the disbursed loan amount. Please ensure the loan funds are available for us to debit. If the debit for the disbursed balance is unsuccessful, the loan will not be cancelled: it will be reopened and interest accrued will apply.

Please do NOT send a check or any additional payments to Square Capital or the SBA. Doing so may result in an additional cancellation ACH debit to your bank account and longer processing time of your cancellation request.

Once Square Capital processes your cancellation, you will receive a follow-up email confirmation regarding your PPP loan cancellation status.

Yes. PPP loans (the full principal amount and any accrued interest) may be fully forgiven, meaning they do not have to be repaid. If you do not apply for forgiveness, you will have to repay the loan. Businesses have up to 24 weeks from the date you received the loan to spend the funds in a manner that is eligible for loan forgiveness.

• Businesses with loans up to $150,000 may use Form 3508S to apply for forgiveness. This application has fewer calculations and does not require borrowers to submit documents with their forgiveness application. If you are eligible to use Form 3508S, you won’t need to submit documents showing your eligibility for forgiveness with your forgiveness application.

• If you are not eligible to use the Form 3508S (meaning your PPP loan was greater than $150,000), you will need to apply for forgiveness using Form 3508EZ or Form 3508. To qualify to use Form 3508EZ, you must answer certain eligibility questions, like whether you decreased your employee headcount or hours during your Covered Period, whether you decreased employee wages by more than 25% during your Covered Period, or whether your business was unable to operate at pre-COVID levels due to COVID-related restrictions. If you’re eligible to use Form 3508EZ, you will need to provide documentation evidencing that your loan was spent on expenses eligible for forgiveness; however, you will not need to perform the employee headcount or wage reduction calculations that can reduce your eligible forgiveness amount.

• If you’re not eligible to use Form 3508EZ, you will need to apply for forgiveness using Form 3508, which will require all documents and the headcount and wage reduction calculations. Form 3508 will be available as a PDF file.

Additionally, if you received a second PPP loan, you will need to provide documentation showing that your business had a 25% or greater decrease in revenue between 2019 and 2020, or a quarter of 2019 compared to a quarter of 2020. Please note, you are required to maintain documentation showing you used loan funds for eligible purposes for up to four years after you submit your forgiveness application.

For more detail on PPP loan forgiveness, please consult the SBA website. Please ensure you closely review program rules regarding forgiveness eligibility to ensure you are eligible for forgiveness. Accepting a PPP loan may affect your eligibility for state-administered unemployment compensation or unemployment assistance programs.

If you applied for your PPP loan with a Form 940, 941, 944, or W-2.

You may be eligible for full forgiveness if:

• Entire loan is used for qualifying costs:
  • At least 60% is used for payroll
  • And the rest is used for business rent, business utilities, mortgage interest on a business property, operations costs, property damage, supplier costs, or worker protection.
• You either don’t lay off employees or rehire them by the end of your covered period.
• For your employees who make less than $100,000 a year, you either don’t cut their wages by more than 25% or you restore their original wages by the end of your covered period.
• For loans under $50,000, you may still qualify for full forgiveness even if you have reduced your number of employees or decreased salaries and wages.
• For second PPP loans, you can demonstrate that your business had a 25% or greater decrease in revenue between 2019 and 2020, or a quarter of 2019 compared to a quarter of 2020.

You may be eligible for partial forgiveness if:

• Your loan is over $50,000 and you lay off employees, and don’t rehire them by the end of your covered period. If so, your forgiveness amount will be reduced by the percentage decrease in your number of employees
  • For example, if you lay off 20% of your employees, your forgiveness amount will be reduced by 20%.
• Your loan is over $50,000 and your total compensation for employees who make less than $100,000 a year decreases by 25% or more for each employee, the forgiveness amount the wage decrease exceeding 25%.

If you applied for your PPP loan with a Form 1040 Schedule C.

Your loan may be fully forgivable if you select a 24-week covered period on your forgiveness application.

Yes. You will have to complete your forgiveness application through Square Capital. At least 60% of your PPP loan must be used for payroll costs and the remainder must only be used for qualifying non-payroll costs. Businesses have up to 24 weeks from the date you received the loan to spend the funds in a manner that is eligible for loan forgiveness.

If you lay off employees, the forgiveness amount will be reduced by the percentage decrease in your number of employees. If your total payroll expenses on workers making less than $100,000 annually decreases by more than 25%, the loan forgiveness amount will be reduced by the wage decrease exceeding 25%. If you laid off some employees or reduced employees’ wages, you can still be forgiven for the full amount of your payroll cost if you rehire your employees or restore their original wages by the end of your covered period. For loans under $50,000, you may still qualify for full forgiveness even if you have reduced your number of employees or decreased salaries and wages. For second draw loans, regardless of the size of your loan, you will be required to provide evidence that your business revenue decreased by at least 25% between 2019 and 2020.

If you do not apply for forgiveness and use the loan for these purposes you will have to pay back the loan.

PPP loans that are not forgiven will have a 1% fixed annual interest rate over the term of the loan, which is either 2 years (any PPP loan made prior to 6/5/20) or 5 years (any PPP loan made on or after 6/5/20). Interest will start accruing the day the loan is originated. Repayment will be made with monthly payments, which will be automatically debited from your Square linked account. Repayment is deferred to the date of your loan forgiveness decision. Businesses who choose not to apply for forgiveness must begin making payments within about 16 months of receiving the PPP loan funds.