PPP Round 2: What Small Business Owners Need To Do Right Now To Get Help

Syracuse, NY – The $ 900 billion stimulus bill contains $ 284 billion for a second round of small business loans under the federal government’s paycheck protection program.

The US Small Business Administration approved 5 million PPP loans, for a total of $ 500 billion, in the first round of the program, which ended on August 8. The program is helping businesses affected by economic shutdowns during the coronavirus pandemic and avoiding layoffs.

ASB issued rules for the second round. It opens next week, so don’t hang around.

Here’s what business owners need to know:

Can a business apply for a second loan if it got one in the first round?

Yes, businesses can receive a second loan – called a second drawdown – if they have spent the full amount of the first loan on or before the second loan disbursement date and are still in need of assistance. (However, it’s not clear whether borrowers who have returned unused portions of their first loans are eligible for a second loan, according to law firm Bond, Schoeneck & King.)

When and how can companies apply?

Loans will be made through lenders approved by the SBA and guaranteed by the SBA. Businesses should therefore approach these lenders by filling out the application forms provided by the bank. It is a good idea for applicants to first check with banks they already have a relationship with to see if they will provide PPP loans. They can also check the List of SBA lenders participating in the PPP program.

When can borrowers apply?

Community financial institutions will be able to grant first-draw loans (loans to companies that have not yet received a PPP loan) from Monday, January 11 and second-draw loans (loans to companies that have already received one) from Wednesday 13 January The program will open to all participating lenders shortly thereafter.

The Economic Aid Law defines community financial institutions as four types of lenders: community financial development institution, minority depository institution, community development corporation, and micro-lender intermediary.

What is the deadline to apply?

The program will end on March 31, 2021, or sooner if the money runs out like it initially did in the first round of the program. Companies should therefore apply as soon as possible.

Which companies are eligible?

For businesses looking for their first PPP loan, the requirements are generally the same as in the first round.

First-draw loans are generally limited to companies with a maximum of 500 employees (including domestic and foreign affiliates). Certain types of companies are excluded from the second round, including listed companies, companies primarily engaged in political or lobbying activities, and companies affiliated with China.

Companies looking for a second drawing loan cannot employ more than 300 people (500 employees for restaurants and hotels) and must demonstrate a reduction of at least 25% in their gross revenue between a comparable quarter in 2019 and 2020. Alternatively, a borrower can submit an annual fee. forms showing annual revenue reduction of 25% or more in 2020 compared to 2019.

Why are second-draw loans generally limited to businesses with 300 or fewer employees rather than 500?

The first cycle of the program was criticized for lending money to large companies that had access to capital and, therefore, did not really need government loans. Jeffrey Scheer, business attorney at Bond, Schoeneck & King, said Congress wanted to make sure those on a second loan really needed it.

“They really tried to focus on small businesses,” he said.

How much can a business borrow?

Loans are capped at 2.5 times the average monthly salary costs of an applicant in the year before the loan is granted (3.5 times for qualifying restaurants and other hotel businesses).

Loans are limited to a maximum of $ 10 million for first-time PPP borrowers and $ 2 million for second-time borrowers.

What can the money be used for?

The loan proceeds can be used to cover a company’s payroll and certain other expenses, including operating expenses, property damage costs, supplier costs, and worker protection expenses.

What about loan forgiveness?

If a business uses at least 60% of the loan on salary expenses and maintains its employment levels during the period covered by the loan, it can apply for loan cancellation. Otherwise, the loans bear an interest rate of 1% and a term of five years.

Canceled P3 loans are not considered income for federal tax purposes.

How long are the loans covered?

In the first round, companies had to choose between eight or 24 weeks. But the second round offers more flexibility, allowing companies to select any period between eight and 24 weeks.

Will the loans require collateral or personal guarantees?

No, the loans will be 100% guaranteed by the US Small Business Administration and will not require collateral or personal guarantees.

Rick Moriarty covers business news and consumer issues. A tip, a comment or an idea for a story? Contact him at any time: E-mail | Twitter | Facebook | 315-470-3148