The coronavirus relief bill signed in late December includes a second round of Paycheck Protection Program (PPP) loans. So far, this is already proving to be a lifeline.
The coronavirus pandemic has hit small businesses, hurting communities and killing jobs. Fortunately, there was some relief in the form of the Paycheck Protection Program, which first became available in the spring of 2020. Thanks to the P3, small businesses were eligible for forgivable loans to cover. salary costs and other essential expenses. And now there is a second round of PPP loans to apply for.
Over 60,000 loans and more
The Small Business Administration (SBA) recently announced that it had in the first week since the opening of the second round of funding. From January 11 to 17, some 3,000 lenders granted more than $ 5 billion in loans.
These loans can be a lifeline for struggling businesses that are still affected by the pandemic. Restaurants, for example, are forced to operate within strict capacity limits, which kills their income. Additional PPP funding could save countless jobs in the first half of 2021, not to mention prevent thousands of small business closings.
Not a scrum
Qualifying for a P3 loan in the spring was easier than qualifying now. Back then, the only requirement was that companies with 500 or fewer employees certify their need for money due to economic uncertainty. And really, during the first months of the pandemic, what business could not claim it legitimately? But companies applying for a second round of PPP financing must meet more stringent requirements to receive a follow-up loan.
How to qualify for a second PPP loan
Businesses looking for a second PPP loan must first deplete their first loan funds. From there, applications are open to companies with less than 300 employees, and not 500 as in the first round. In addition, general economic uncertainty will not reduce it for this monitoring cycle. Rather, businesses must prove that they experienced a loss of revenue of 25% or more in a quarter of 2020 to be eligible for a second loan.
From there, Round 2 PPP loans are capped at $ 2 million or 2.5 times a company’s salary costs, whichever is lower. There is an exception for restaurants and hotels, which can apply for loans up to 3.5 times their monthly salary costs. Either way, the $ 2 million borrowing limit still exists.
To be eligible for PPP loan cancellation, at least 60% of these funds must be used to cover salary expenses. The remaining 40% can be used for other operating costs, such as rent and utilities.
Companies can also apply for the first time
Any small business that has not received an initial PPP loan by August 8, 2020 can apply for a loan in this second round of funding. First-time borrowers are eligible if they have 500 workers or less; they can receive a loan up to 2.5 times their monthly salary costs, up to a total of $ 10 million.
How to apply for a second PPP loan
Businesses looking for a second PPP loan should start with the banks they used to secure their initial loans. Meanwhile, companies applying for the first time now should start by contacting banks they already have a relationship with. Community banks can also be a good resource for obtaining PPP finance. In fact, a number of local institutions have already helped make PPP funds accessible to underserved communities.
Help is available
Given the scale of the pandemic, the emergence of COVID-19 variants, and the rollout of vaccines, there’s a good chance the U.S. economy won’t recover for some time, and small businesses could pay the price. Those who qualify for a second PPP loan shouldn’t hesitate to look for one, as that money could be the difference between staying afloat and shutting down for good.