Navigating PPP Loans for Small Business
NEW rules for the next round of funding for the Paycheck Protection Program should be helpful for smaller businesses.
The previous two rounds have been easier for larger businesses to access but new relaxed guidelines will help smaller entities – even those that may have had a successful earlier round.
A key change has been a revision to the calculation formula that determines the PPP loan, which now allows self-employed individuals, independent contractors, and sole proprietors to gain more support. A further $1 billion has been specially ringfenced to help qualifying businesses in low- and moderate-income areas.
Another bar on small business owners who have non-fraud felonies on their records has been lifted meaning they can now apply for the cash unless they are incarcerated when they apply. Similarly, any business owner who is behind on federal student loan repayments is also now able to apply for the program when they were excluded under earlier rounds.
The first two PPP rounds were only available to US citizens – the new third round is open to non-citizens provided they are lawful US residents, including visa and Green Card holders.
It is important to act fast – the deadline for applications is the end of this month, March 31, but the previous two rounds ran out of funding considerably before the deadline.
The Paycheck Protection Program was started with $349 billion of money after Congress passed the CARES Act at the start of the pandemic last year. Initial funding ran out in April 2020, followed by the second round of $320 billion which expired in August. The new third round has been funded with a further $284 billion.
Of this, $35 billion is ringfenced for first-time PPP borrowers with 500 or fewer employees, and $15 billion reserved for first-time borrowers with 10 or fewer staff.
Congress passed the Paycheck Protection Program Flexibility Act later last year which gave the scheme greater discretion in what qualified for successful funding. The first two rounds had to be spent on payroll, cover utilities, and covered rent but more options are now available. Borrowers can also choose between eight and 24 weeks for the covered period, and a forgiveness scheme for loans of $150,000 or less has been simplified.
Loan forgiveness can be sought for first draw loans if businesses meet set employee retention criteria and spend the money on allowed expenses. First draw loans have a one percent interest rate and a five-year maturity. They do not need collateral nor a personal guarantee and have no fees attached.
Application forms for the PPP scheme are available on the Small Business Administration website at www.sba.gov. Noble-Davis also has a plethora of resources for loan information and assistance, visit them today!
