How to Apply for a New PPP Loan
Today, small business owners struggling to cover their overhead costs can apply for a second round of loans not taxable under the Payroll Protection Program (PPP). The program includes changes that target small and minority enterprises. Here’s what you need to know and how to apply.
What is PPP?
Under the CARES Act passed last March, the first iteration of the PPP provided a total of $ 519 billion in bad loans to help businesses cover wages and overheads during the pandemic. The latest aid package provided a second round of PPP loans on a first come, first served basis, totaling $ 284 billion.
The US Small Business Administration (SBA), which implements the program, has been criticized for unfairly giving the first round of funding because banks favored existing clients, which in particular benefited congressional- led businesses and large public companies. who already have access to capital markets.
How is PPP 2.0 different?
- Qualified borrowers who have already received PPP loans will also be eligible for new tax-free loans. However, funds were set aside for new borrowers, with priority given to underserved minority businesses, women and veterans. According to the Journal of Accountancy , more than $ 105 billion in funding is targeted at small businesses, of which $ 15 billion is set aside for lending by local financial institutions.
- It should be noted that to ensure a fair distribution of funds, the SBA will only accept PPP loan applications from the financial institution community (as opposed to large banks) from today through Wednesday.
- Unlike the original PPP, publicly traded companies and businesses controlled by the president, vice president, chief executive and members of Congress (or their spouses) are no longer eligible for PPP loans.
- Borrowers such as local chambers of commerce, business leagues, real estate councils, housing cooperatives, and some news stations are now more clearly eligible for assistance, according to legal news site JD Supra . Congress also confirmed that churches and faith-based organizations are eligible borrowers.
- The new legislation expands the scope of expenditures that PPP loans can be used for, including spending on business software or cloud computing; material damage as a result of vandalism (if not already insured); payments to suppliers; as well as costs associated with COVID, such as improving ventilation or purchasing PPE.
- Borrowers can now set the coverage period for their PPP loan to any length from eight to 24 weeks.
- To address concerns of fraud, the SBA has introduced new due diligence checks that may slow down the application approval process.
Who is suitable for PPP 2.0?
Secondary loans have a maximum size of $ 2 million and are available to borrowers with no more than 300 employees. Borrowers must also demonstrate a quarterly loss of revenue of 25% or more compared to the same quarter in 2019.
First-time PPP borrowers will be subject to the original program rules, which allow a maximum of $ 2 million in loans to companies with up to 500 employees without the need to prove a loss of income.
For both types of borrowers, these loans can be forgiven if at least 60% of the total secondary loan is used to pay salaries in order to be eligible for full loan forgiveness. The remaining 40% can be used for other eligible expenses.
How to apply
Eligible businesses can apply for a PPP loan directly from a suitable private lender such as a bank, public lender or credit union. However, according to the AP , borrowers seeking help through their community lenders for the first time have priority access today and tomorrow, while borrowers who seek help through these lenders for the first time on Wednesday. It is currently unclear exactly when PPPs will become available to all borrowers and lenders. The program will be open for applications until March 31, 2021.
For more information and to receive an invitation to apply for a PPP loan, click here .