The PPP, or Paycheck Protection Program, is designed to help small businesses through the challenging times of COVID-19 when many are barely surviving, let alone growing or thriving. In December, Congress passed an economic aid act that reinstated this program, but they also changed some of the requirements. If you think your small business should be eligible for a second draw, read on for the details and conditions surrounding the new PPP.
Small businesses should be eligible for this second PPP if they are new borrowers with fewer than 500 employees or existing borrowers with fewer than 300 employees as long as they were in business before February 15th, 2020. If you already received a “first draw” from the first PPP, you must have used or have been using the total loan amount for eligible expenses, and you must be able to show that you had a 25% reduction in gross receipts for at least one quarter of 2020 compared to 2019.
The SBA, or Small Business Administration, will have this second PPP window open for a limited time. It opened on January 11th, 2021, and it will stay open till March 31st, 2021.
If you do receive a PPP loan, what can you use it on? Many expenses qualify. Employee payroll is the biggest (and to be eligible for forgiveness, you must spend at least 60% of the loan on payroll), but you can also use the funds on employee benefits, like group health insurance. You can use the funds to cover your rent or mortgage interest, utilities, expenditures like cloud systems or software that allow you to continue to work, and worker protection costs, including PPE. If your property suffered vandalism or looting in 2020 and is not already insured, the loan money can cover these onerous costs. Also, remember that this time around, business expenses are tax-deductible.
To apply for the loan, you will fill out and submit paperwork to the SBA 7(a) lender of your choice. These lenders include the big national banks, but they also emphasize community banking institutions to help underserved communities. When you apply, you can apply for up to 2.5 times your average monthly payroll in 2019 or 2020 up to $2 million (unless you’re in foodservice, and then it is 3.5 times your average monthly payroll costs up to $3 million).
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