Paycheck Protection Program (PPP Loan)
What Is a PPP Loan?
PPP loan is a government-backed small business loan created under the Paycheck Protection Program to help businesses continue paying employees during the COVID-19 pandemic.
The program was established through the Coronavirus Aid, Relief, and Economic Security (CARES) Act in 2020.
PPP loans were issued through banks and approved lenders but guaranteed by the U.S. Small Business Administration (SBA).
The program focused on helping businesses maintain payroll and avoid layoffs.
Program Status
The Paycheck Protection Program ended on May 31, 2021.
Although new PPP loans are no longer issued, borrowers may still apply for forgiveness on eligible loans.
Why It Matters
PPP loans provided emergency financial relief to millions of small businesses during the pandemic.
Key features included:
- Low interest rates
- Deferred payments
Potential loan forgiveness if funds were used for eligible expenses
Many businesses used PPP loans to maintain payroll and continue operations during economic disruptions.
How PPP Loan Works
PPP loan provided funding to businesses to cover payroll and certain operating expenses.
Example: A small restaurant that experienced a decline in revenue during the pandemic could receive a PPP loan to continue paying employees and covering essential costs.
If the business used the funds for approved expenses and met program requirements, the loan could be partially or fully forgiven.
Borrowers applied through participating banks and lenders.
PPP Loan vs Traditional Small Business Loan
PPP Loan → Government emergency loan with forgiveness options
Traditional Business Loan → Standard loan requiring full repayment
PPP loans were designed as temporary pandemic relief.
Related Terms
