The Small Business Administration announced an extension of the Paycheck Protection Program. Small and medium-sized businesses now have until Wednesday, March 31 to apply.
Note: This story was last updated February 19, 2021
The Small Business Administration announced an extension of the Paycheck Protection Program. Small and medium-sized businesses now have until Wednesday, March 31, 2021 to apply.
If you haven’t received a PPP loan before, you may be eligible for a First Draw PPP Loan. Certain businesses who have previously received a PPP loan may be eligible for a Second Draw PPP Loan.
The SBA announced on January 19, 2021 that SBA borrowers who have 7(a) loans, 504 loans, or Microloans approved during the period beginning on February 1, 2021 and ending on September 30, 2021, will receive payments for a 3-month period instead of a 6-month period, subject to funding availability. This reduction is due to insufficiency of funds, according to the SBA.
Paycheck Protection Program details
The original guidelines for PPP loans provided SMBs up to 2.5 times their average total monthly payroll costs, at a maximum of $2 million. Loan forgiveness under the original program required employers allocate at least 75% of the funds to payroll. Businesses have up to 24 weeks to rehire staffers and still be eligible under the program.
A revised version, the Paycheck Protection Program Flexibility Act (PPPFA), signed on June 5, lowered the necessary amount of funds allocated to payroll to 60%. Employers can allocate the remaining funds to rent/mortgage, utilities, and supplies. The PPP also allows businesses to use the funds for supplies that help them get back to work: cleaning supplies, dividers to protect workers/customers, updated ventilation systems, and masks are eligible for loan forgiveness.
Who can apply for the PPP?
Any business with less than 500 employees can apply for the PPP loans including independent contractors, sole proprietors, and self-employed individuals. Some organizations that meet SBA industry size standards of more than 500 are also eligible for loans providing they meet the agency’s guidelines.
Help for hospitality and food services
Business with an NAICS code that begins with 72 (Accommodations and Food Services) can also apply if they have more than one location, providing each location employs less than 500. This includes virtually every business in the hotel/hospitality industry including B&Bs, RV campgrounds, and more. In food and beverage, restaurants, bars, food trucks, caterers – even sole proprietor cupcake bakers and food contractors are eligible.
Nonprofits and service organizations
Any 501(c)3 organization is eligible for the loans and forgiveness along with 501(c)(19) veterans organizations, and tribal business concerns.
How to apply for a new or additional loan
The SBA website lists detailed information on how to apply for a PPP loan and has a link to find vendors in your state that can help with the application. This includes any SBA 7(a) lender (which includes most banks), federally insured depository institutions, federally insured credit unions, and Farm Credit System institutions. You can download the application in advance so you know what documentation you will need to submit, as well.
Loan forgiveness applications
Amid the confusion of the original loan forgiveness program, the SBA recently revised the process to convert PPP loans into loan-forgiven grants that are not required to be repaid. Their new “borrower-friendly” forms cut the instructions and paperwork by half and reduces the amount of documentation SMBs have to provide.There are 2 types of forgiveness forms. For some businesses, the EZ Forgiveness Application is only 3 pages, and applies to self employed, sole proprietors, and larger businesses that meet these criteria:
- If you did not reduce the number of staff hours and did not reduce employee salaries by more than 25%, or
- If your business was shuttered because of health directives including mandatory shutdowns, slowdowns or reductions in the amount of patrons allowed within the location and you did not reduce staff wages by more than 25%
For other businesses, the new 5 page forgiveness form is also streamlined to help ease the process. If you don’t qualify for the EZ form, most businesses are finding the revised form much less complex.
Who should apply?
Every small business should apply for a PPP loan if they need even the slightest assistance getting through the pandemic. For essential businesses that haven’t had business hours affected, at the very least assistance is available to cover the cost of protective equipment and materials for staff members and customers.
For those whose doors have closed or have had limitations put on their business, the program is designed specifically to help get over the hump the pandemic has created so they can get back to full speed once the threat has passed. The loan forgiveness aspect allows business to get back some of the money they’ve paid in taxes to keep them afloat through this difficult time.