Millions of small businesses could soon apply for another forgivable federal loan as part of the rebooted Paycheck Protection Program.
Yesterday marked the first day for select lenders and borrowers to take advantage of the program, which was revived along with other small business benefits upon the passage of the government’s $900 billion coronavirus-related stimulus package. The loans are initially available to institutions that provide funding for small businesses in underserved communities, but other small businesses can expect to access the loans in the next week or so.
According to the Small Business Administration and Treasury Department, the new PPP has $284.5 billion in available funds, including $35 billion for first-time loans and $15 billion for community financial institutions. (Comparatively, the inaugural PPP offered $525 billion in loans over five months before it stopped accepting applications in August.)
“This updated guidance enhances the PPP’s targeted relief to small businesses most impacted by COVID-19,” Treasury Secretary Steven Mnuchin said in a statement. “We are committed to implementing this round of PPP quickly to continue supporting American small businesses and their workers.”
Here, what small businesses need to know about the latest PPP round.
Why am I unable to access funding now?
Although the PPP reopened on Jan. 11, the Small Business Administration offered initial access to community financial institutions with $1 billion or less in average total assets — benefiting minority-owned businesses and lenders that might have had trouble securing PPP loans in the past.
I’m a first-time small business applicant. Do I qualify?
In order to be eligible for a loan, first-time borrowers must have been operating their business on Feb. 15, 2020, as well as belong to one of the following groups: businesses with 500 or fewer workers that are eligible for other SBA 7(a) loans; sole proprietors, independent contractors and self-employed individuals; nonprofits, including churches; accommodation and food services operations with NAICS codes starting with 72 that have under 500 employees per location; Sec. 501(c)(6) business leagues; and some news organizations and nonprofit public broadcasting entities with no more than 500 workers per location.
Can my business get a second PPP loan?
Businesses that received funding as part of the CARES Act can still apply for a second PPP loan. Their eligibility depends on whether they have: 300 or fewer employees; have used or will use the full amount of their first PPP loan on or before the date that the second PPP loan is distributed to the borrower; and experienced a 25% or more decline in gross receipts in all or part of 2020.
What is the maximum loan amount?
Both first- and second-time PPP borrowers can receive a loan of up to 2.5 times their average monthly payroll costs, with a cap of $100,000 per worker. For first-time borrowers, the maximum loan amount is $10 million, while second-time borrowers are capped at $2 million.
How can my business meet eligibility requirements for full loan forgiveness?
All loans will be forgiven if they’re used on eligible costs, such as payroll, rent, mortgage and utilities, as well as covered operations expenditures, covered property damaged costs, covered supplier costs and covered worker protection expenditures. Borrowers are also required to spend at least 60% of PPP funding on payroll costs to receive full loan forgiveness.