PPP Loans: Small businesses can start applying for new loans today

The Paycheck Protection Program will reopen on Monday. But initially it will only be available to companies applying to community financial institutions. That are banks and lenders that provide financing to small businesses in disadvantaged communities, many of whom had struggled to get loans or failed to apply during previous rounds of PPP lending.

The package also included measures designed to make PPP lending more flexible for all small businesses, more useful for hard-hit restaurants, and more accessible to micro-businesses than in the first two rounds of credit.

Here are six ways the schedule has changed for this latest round:

Companies may now receive a second PPP loan. Companies that received a PPP loan when the program first came into effect can apply for a ‘second draw’ as long as they are not a publicly traded company, employ no more than 300 people, have taken advantage of them, or will fully use. first authorized use PPP loan, and may show a decrease in gross revenues of at least 25% in the first, second or third quarter of this year compared to the same quarter in 2019.

Targeted funds are made available for the most vulnerable companies. Specific amounts – ranging from $ 15 billion to $ 25 billion – are for community development financial institutions – which typically lend to minority businesses in underprivileged communities – and for businesses with fewer than 10 employees, as well as those with low income. income areas.

Restaurants can get bigger loans. Most eligible companies may receive a loan equal to 2.5 times their average monthly wage costs, just as before. But restaurants and lodging businesses can now apply for loans equal to 3.5 times the monthly payroll.

However, no loan may exceed $ 2 million, down from the previous $ 10 million ceiling.

There is more flexibility in how the loan can be used and still forgiven completely. In order to fully waive any PPP loan, at least 60% of the money must be used for wage costs. But the remaining 40% or less can be used to cover an even wider portion of operating costs than was the case during the early rounds of PPP loans.

In addition to mortgage interest, rent and utilities, the loan can now be used to cover the costs of personal protective equipment and other expenses incurred to meet Covid restrictions, as well as certain operations, property damage, and supplier costs.

The forgiveness process is easier. To forgive a PPS loan, businesses that have borrowed $ 150,000 or less simply need to submit a one-page certification detailing the number of employees the company has retained as a result of the loan, an estimate of how much of the loan was spent on payroll and the total loan amount. Borrowers must also confirm that the information is correct and that they have met the loan requirements.

This should help many small businesses that have received PPP loans during previous loan rounds. According to the Small Business Administration, 87% of the loans were less than $ 150,000.

The tax benefit for PPP loan recipients has just increased. While the loans are tax-free to recipients if used for authorized purposes, the latest Covid relief package has sweetened the pot further.

Businesses typically deduct their wage and operating expenses from their gross income. Now, even if those expenses were largely paid for by the tax-free loan, they are still deductible.