On Dec. 27, 2020, Congress passed a $2.3 trillion dollar spending bill known as the COVID Relief Package, and in it is more aid for small businesses in the form of the Paycheck Protection Program (“PPP”). This particular relief round is targeted to mom and pop businesses!
This article will not provide in-depth history on PPP; rather, it is intended to provide high level insights on how to apply for second round PPP loans pursuant to the most recent legislation passed. Notably, both first time PPP applicants and second wave applicants are eligible to apply to receive a loan that can qualify for full forgiveness.
As of the publishing date of this article, some smaller community banking institutions are already taking applications and submitting them to the SBA on behalf of their clients. If you are banking at a community bank or other smaller bank, you may be eligible to apply immediately. Others who bank at larger banking establishments may not be eligible to apply until early next week beginning on or about Tuesday, January 19, 2021. Regardless, all small business owners who meet the requirements set forth below should prepare their applications and supporting documents and connect with their banker immediately to ensure they submit timely. Funds are limited and are offered on a first come, first serve basis.
Lender Match is a great resource for small businesses looking for a banking institution to help with PPP applications.
Two applications exist. One application is for first time applicants (i.e., those that did not receive PPP funding during the first round). A second application exists for applicants who are applying for the second time.
First and Second Round PPP Eligibility Requirements
To be eligible to apply for the Second Round of PPP loans, applicants must:
- Have previously received a first draw PPP loan and will or has used the full amount only for authorized uses;
- Have no more than 300 employees;
- Demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020; and
- Have not permanently closed. Businesses that have temporarily closed or suspended operations can receive a second loan.
Businesses that receive a Save Our Stages grant cannot receive additional PPP loans.
If you did not apply or receive PPP during the first round, you can read more about eligibility requirements here for first time borrowers and take steps to receive a loan during this second wave. All sole proprietors, independent contractors and self employed individuals are eligible.
How Much Money Can I Receive Through PPP?
Borrowers can receive up to 2.5 times their average monthly payroll costs. Those average monthly payroll costs can be calculated using one of the following methods:
- The 12 months prior to the loan
- The calendar year 2019
- The calendar year 2020
Additionally, seasonal businesses (meaning, those businesses operating less than seven (7) months in a calendar year) and even new businesses in operation on February 15, 2020 but not open a full 12 months, are eligible to apply but will use a different formula to calculate average monthly payroll.
Also, PPP loans for hotels, restaurants and other accommodation and food service businesses can borrow even larger amounts – up to 3.5 times their average monthly payroll costs.
PPP Loan Terms
Loan terms for the second round of PPP are the same as the first. Applicants can apply for total forgiveness of the loan if loan proceeds are used for authorized expenditures.
In summary, the PPP application is a simple 2-page form, so if your business meets the eligibility requirements set forth below, we encourage you to act immediately! Again, loans are first come first serve and intended to help mom and pop small businesses survive the impact of the COVID pandemic.
Written by Ashley Murphy