How to Apply for a “PPP 2.0” Loan for Your Small Business
The Senate approved a two-month extension of the second round of tax-free PPP loans for business owners trying to cover overhead costs. It was deemed necessary to set a new deadline of 31 May as the number of owners increased who needed more time to submit applications. 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, was criticized for unfairly allocating funding in the first round, as banks favored existing clients, which, in particular, benefited the enterprises controlled by members of the Congress and large public companies that already have access to capital markets.
As a result, PPP 2.0 allocated funds to small businesses and increased the amount of expenditures that can be used for PPP loans, including business software costs, payments to vendors, and COVID-related costs such as ventilation or PPE. However, according to Forbes , the approval process for these loans was slowed by technical glitches and additional guidance required by independent contractors, so the deadline had to be extended. The bill is now being sent to President Biden for signature, which is expected this week.
Who is eligible for a PPP?
First time PPP borrowers are eligible for a loan if they own a business with up to 500 employees, were employed as of February 15, 2020, and can provide payroll documentation to demonstrate lost income.
The qualification requirements for PPP loans from the second draw are narrower than the PPP loans from the first draw. The limit remains at $ 2 million, but is limited to borrowers with 300 or fewer employees. Borrowers must also demonstrate a quarterly gross revenue loss of 25% or more compared to the same quarter in 2019.
Both first and second disbursement loans can be forgiven if at least 60% of the total loan is used to pay salaries (although second disbursement borrowers with principal no more than $ 150,000 must provide documentary evidence of lost income).
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. The program will be open for applications until May 31, 2021. For more information and to receive an invitation to apply for a PPP loan, click here .
This story was originally published in Fed. February 22, 2020 and updated March 29, 2021 with new information.