Two-Week Window Opens For Small Business PPP Loans

For a couple of weeks, the White House is narrowing the definition of "small business" to get PPP loans to people who need them.

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UPDATE (February 25th, 2021)— Starting Feb. 24, the Biden-Harris administration opened a two-week period where companies with fewer than 20 employees can apply for forgivable loans under the Paycheck Protection Program (PPP).

Typically, PPP loans are available to any company with fewer than 500 employees. They’re meant to help businesses undergoing economic hardship cover the cost of things like worker salaries as well as rent and utility payments.

“The Biden-Harris administration is announcing several reforms to build on this success by further targeting the PPP to the smallest businesses and those that have been left behind in previous relief efforts,” according to a statement. “While these efforts are no substitute for passage of the American Rescue Plan, they will extend much-needed resources to help small businesses survive, reopen, and rebuild.”

When the PPP began last year, the system was criticized for failing to aid small businesses that actually needed it. Instead, much of the money went to publicly-traded companies and professional sports franchises. These larger companies had much better access to the resources required to apply for these loans while still being considered “small businesses” under the PPP’s 500 employee definition.

According to JP Morgan Chase, 88 percent of businesses in the U.S. have fewer than 20 employees. This two-week window gives the businesses the opportunity to get the help they need without being crowded out by larger, more powerful counterparts.

“They are Main Street businesses that anchor our neighborhoods and help families build wealth … these businesses often struggle more than larger businesses to collect the necessary paperwork and secure relief from a lender,” the Biden/Harris statement says. “The 14-day exclusive application period will allow lenders to focus on serving these smallest businesses.”

The Biden/Harris administration will also be setting aside $1 billion in PPP loans for sole proprietors, independent contractors, and self-employed individuals. The loan calculation formula for these applicants will also be revised so the loans offer more relief.

Paycheck Protection Program Reopens With Updated Rules

(January 13, 2021)— The Small Business Administration and the U.S. Department of the Treasury have officially reopened the Paycheck Protection Program (PPP) to provide key relief to small businesses and their employees.

This second round of the PPP is part of the coronavirus relief bill passed last December. It comes with a set of updated rules and regulations meant to ensure this financial aid is not used illicitly and reaches the people and institutions who truly need it.

The PPP officially reopened on Jan. 11 for new borrowers and on Jan. 13 for certain existing borrowers. For now, only community financial institutions may initiate PPP loan applications, which should help place small businesses at the front of the line for this round of assistance.

Other key updates to the Paycheck Protection Program highlighted in the Treasury Department’s press release include:

  • Borrowers can set their PPP loan’s covered period to be any length between eight and 24 weeks to best meet their business needs;
  • PPP loans will cover additional expenses, including operations expenditures, property damage costs, supplier costs and worker protection expenditures;
  • The PPP provides greater flexibility for seasonal employees;
  • Certain existing PPP borrowers can request to modify their First Draw PPP Loan amount.

The new rules also allow businesses who took out loans in the previous PPP to apply for a second loan if they:

  • Previously received a First Draw PPP Loan and will or have used the full amount only for authorized uses;
  • Have no more than 300 employees;
  • Can demonstrate at least a 25 percent reduction in gross receipts between comparable quarters in 2019 and 2020.

The small business loans taken on through the PPP are forgivable if the borrower meets criteria set by the Small Business Administration (SBA). They carry an interest rate of one percent and require no fees or collateral. At least 60 percent of the loan must be spent on payroll, while the rest may go toward eligible operating expenses.

“This updated guidance enhances the PPP’s targeted relief to small businesses most impacted by COVID-19,” says Treasury Secretary Steven Mnuchin. “We are committed to implementing this round of PPP quickly to continue supporting American small businesses and their workers.”

The application for first-time PPP borrowers can be found here. To find a lender approved by the SBA, visit this portal.

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