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The Treasury Department has reopened the Paycheck Protection Program (PPP) under new guidelines on the program for forgiving small business loans. The new conditions aim to suppress earlier criticism of the relief efforts. About 5,400 companies have received about $ 520 billion to date, but the aid program has been plagued by forgiveness confusion and complaints that the smallest businesses were not getting access to much-needed assistance.
“Today’s guidelines build on the success of the program and adapt to the changing needs of small business owners by providing targeted facilitation and an easier award process to ensure their path to recovery,” said Administrator Jovita Carranza in a joint press release that last week from the Treasury and the Small Business Administration (SBA).
With the reopening of the PPP, municipal financial institutions will prioritize applications from companies that were previously closed or unable to file with the SBA. Community financial institutions – including Community Development Financial Institutions (CDFI) and Minority Depository Institutions (MDIs) – will also receive initial applications from companies applying for their second PPP loan starting Wednesday.
The SBA said it plans to open the program “to all participating lenders shortly thereafter,” it said in a statement. The last day to apply for a first or second round PPP loan is March 31st.
Related: Use Forbes Advisor’s detailed tool to search for all PPP loans over $ 1 million in 2020.
Who is Eligible for a Second PPP Loan?
Even after several rounds of funding, many companies continue to struggle to survive in an economy that is still affected by the effects of the coronavirus pandemic. President Trump signed a new aid package late last year. The move included an additional $ 284 billion in PPP loans, both to companies that missed the program last year and those seeking a second round of assistance.
Anyone looking for a second PPP loan must meet the following requirements:
- You have previously received a PPP loan and are planning or have already used the full amount on qualifying expenses
- No more than 300 employees
- There was at least 25% less gross income between the comparable quarters of 2019 and 2020
- Requested no more than $ 2 million; the amount awarded is based on the applicant’s payroll
The eligibility criteria have changed for this financing round. In particular, the eligible company size has decreased from 500 employees or less to 300 employees or less, which would leave some companies ineligible for a second loan even if they were approved for a first drawing.
And there is a gray area when it comes to the requirement to demonstrate a 25% reduction in gross revenue for a quarter in 2020 compared to the same quarter in 2019. Adi Rappaport, tax attorney at Gunster, a Florida-based law firm, says: Unclear whether a company that was down in Q2 2020 but recovered in Q3 and Q4 is eligible for another loan. “The question arises as to whether you can certify the necessity of the loan,” he says.
What’s different this time?
The rules for both PPP eligibility and loan waiver have changed repeatedly since the introduction of the PPP in March 2020, with the SBA and the Ministry of Finance making several corrections by the end of the application deadline last summer.
The PPP program was originally designed to cover spending within an eight-week window, but the government eventually expanded it to include up to 24 spending weeks. Also, funds were originally only eligible for parenting if at least 75% of the approved amount was used for payroll, but this has since been reduced to 60%.
Today borrowers can choose the term of their loan for the purpose of lending between eight and 24 weeks. Additional expenses such as operating costs, property damage, supplier costs and employee protection can now be waived in full or in part.
The regulations on tax deductibility have also been clarified. Businesses can claim a deduction from qualifying expenses paid for with PPP funds.
Related: This PPP lending tool simplifies the process
Should you apply?
If you have been locked out or just overwhelmed by the idea of applying for a PPP loan, this may be a good time to reconsider.
“This program was made available by Congress to help you, and if you qualify, I think it will be beneficial for small businesses,” said David Reiling, CEO of Sunrise Banks, a Minnesota-based CDFI since the first round of PPP loan applications accepted Monday. “Forgivable loans are not available every day.”
The latest rules also allow for the automatic waiver of loans of $ 150,000 or less with an optimized business owner self-certification that they meet the eligibility criteria. Even if your company ultimately does not qualify for loan relief – in whole or in part – you still have up to five years to repay the loan at as little as 1% interest. This is one of the most generous terms on any loan that you will find.
If you’re a small business owner and are hesitant to apply because you didn’t have an existing commercial banking relationship to help you with the process, this shouldn’t be a deterrent, says Frank Balestreri, a partner at Bay-Area-based accounting firm Sensiba San Filippo LLP who leads a team focused on PPP loan and PPP loan waiver applications.
He points out that there are no SBA rules that require you to apply for a PPP loan through the same institution that you do your banking with.
“You don’t need a bank account. On the SBA website, they publish a list of organizations that lend money under the program, ”says Balestreri. “It might be beneficial to go to one of the online sources and try that way.”