Coronavirus Aid Relief: PPP Round Two + Application Updates

By Brynne Adamson

Between March and August of 2020, the U.S. Business Administration created the Paycheck Protection Program to help struggling small businesses to stay afloat during the COVID-19 pandemic. The program allowed these businesses to get loans to help pay their employees and other business expenses.

According to the SBA, "The first round of the PPP... was a historic success, helping 5.2 million small businesses keep 51 million American workers employed."

However, many businesses were not able to get a PPP loan in the first round, so the SBA reopened the PPP to allow businesses to get the help they need. The PPP also reopened for borrowers in need of more cash after spending their original loan.

According to Travel Agent Central, on March 1, 2021, "The House of Representatives on Friday approved President Joe Biden's $1.9 trillion COVID-19 relief package." With this package's release, there were a couple changes to the PPP loan process, which will be discussed later on.

You can use a PPP loan to help your business during these unsure times. To help you decide if you need it or if you qualify, take a look at the PPP loan in greater detail below.

Who Qualifies for a PPP loan?

There are a couple of groups impacted by COVID-19 who qualify for a first-draw PPP loan:

Sole proprietors and self-employed people
Small businesses with a certain employee number count (Up to 500 employees for first-time borrowers)
Any non-profit organization, veterans organization or tribal business concern with either 500 employees or a size that matches with the SBA's industry size
Any business with a NAICS code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location

For second-draw PPP borrowers, the qualifications are a little different:

Previously had a PPP loan and used or will use it for the correct purposes
Less than 300 employees
Proof of at least a 25% loss of gross income between 2019 and 2020

In February of 2021, President Biden wanted to focus on smaller businesses who haven't had a chance to get the help they need. So he made changes to the PPP by allowing businesses and nonprofits with less than 20 employees to have exclusive access to apply for a PPP loan between February 24, 2021 to March 9, 2021.

Additionally, the SBA recently made other changes to who qualifies for the PPP to help small businesses:

The PPP funding formula was adjusted for sole proprietors, independent contractors and self-employed individuals. "An additional $1 billion will be allocated for these individuals in low-and moderate-income (LMI) areas," according to Investopedia.
Small business owners with prior non-fraud felony convictions now have access to the PPP
Small business owners who struggle to make student debt payments now have access to the program
Business owners who aren't U.S. citizens can use their Individual Taxpayer Identification Number to apply

How do you get a PPP loan?

You can get your loan from any participating lender in your area; the PPP loan from these lenders will have the same requirements and rules specified by the SBA.

The first-draw and second-draw PPP loans will only be available until March 31, 2021.

How much can you get?

The New York Times finance reporter Stacy Cowley said first-time borrowers, except for sole proprietors, can borrow up to "2.5 times their average monthly payroll cost, up to $10 million."

She said second-time borrowers can only borrow up to $2 million, although those in the food and hospitality industry can borrow up to 3.5 times their average monthly payroll (with the $2 million cap still in place).

Is there interest on the loan?

Yes, there is a 1% interest fee for your loan from the PPP. The second release PPP loan has a 5-year term. However, if both first-time and second-time borrowers meet certain criteria, their loan can be forgiven. According to the SBA, to be forgiven, you must:

Maintain employee compensation levels
Spend at least 60% of the loan on payroll costs, with the other 40% going towards other eligible costs (like rent)

In Conclusion

If you own a small business or are self-employed, take a look at your finances and determine whether or not you need the PPP. Note that you won't be able to get the loan after March 31, 2021. We hope you will be able to recover from the events surrounding COVID-19, with or without the PPP loan.

Get Your Loan Here >

Sources

Arora, R. (2021.) "What Small Business Owners Need To Know About The New Round Of PPP Loans." Forbes.

Cowley, S. (2021.) "Who Qualifies for a Second Round of Small-Business Relief?" The New York Times.

Florida Restaurant and Lodging Association. (2021.) "PPP Relief Round 2 – What this Means for Your Business." Youtube.

Reinicke, C. (2021.) "The next round of PPP loans will soon be available. Here's what you need to know to apply." CNBC.

U.S. Small Business Administration. "First Draw PPP Loans."

U.S. Small Business Administration. "Lender Match helps you find lenders."

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