The COVID-19 pandemic and its related restrictions and lockdown have hit small businesses hard. Over 100,000 small businesses have shut down permanently, while others are hanging on for survival.
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Fortunately, the Paycheck Protection Program (PPP) was introduced in March 2020 to help small business owners to get back on their feet. The federal government rolled the PPP out to help businesses survive the pandemic.
Whether you’re applying for a PPP loan for the first time or you’re looking to lock in the Second Draw PPP loan, here’s what you need to know about PPP funding.
What is a PPP Loan?
The Paycheck Protection Program loan offers small businesses a direct incentive to keep their workers on the payroll. The U. S Department of Treasury says this program will provide small businesses with cash to fund up to eight weeks of payroll costs, including benefits. The goal is preventing job loss and pay cuts.
Business owners can also use the money to pay for mortgage interest, rent, utilities, worker protection cost related to COVID-19, and uninsured property damage cost caused by vandalism or looting during 2020.
The PPP was introduced in March 2020 as part of the Coronavirus Aid Relief and Economic Security (CARES) Act and implemented by the Small Business Administration (SBA). The amount of PPP loan your small business can receive equals 250% of your average monthly payroll costs for the last year or 12 months preceding your PP loan application.
The maximum amount of money any small business owner can borrow is $10 million. And the loan comes with one percent fixed rate.
Businesses that have been running from February 15, 2020, qualify for the funding. Small businesses, self-employed workers, side gig workers, sole proprietors, and independent contractors can apply for the loan.
The administration announced new rules for the PPP loans to help more small businesses to access them. As a result, small business owners with non-fraud felony convictions or student loans can qualify for the loan.
The federal government also prioritized business with 20 or fewer employees for 14-days starting February 24.
Second Draw PPP Loans
Congress has approved another round of PPP loans, meaning additional support for small businesses. Businesses that didn’t secure funding in the first round are now welcome to apply once again.
And if you had previously received a PPP Loan, you can reapply and receive a second loan. Eligible businesses can apply for the Second Draw PPP funding under the same general loan terms as the First Draw loan.
The second PPP loan can help cover payroll costs, including benefits. You can also use the money to cover rent, utilities, mortgage interest, uninsured property damages, and other authorized uses. The terms for the Second Draw PPP funding remain the same regardless of the borrower or lender.
To qualify for a Second Draw PPP loan, a borrower must meet the following criteria:
- Had received a First Draw PPP loan before and will or has used the full amount only for allowed uses.
- The business accommodates over 300 employees
- Can show about 25 percent reduction in gross receipts between comparable quarters in 2019 and 2020
Second Draw PPP loans are available for businesses up to 2.5 times their average monthly payroll. Restaurants, hotels, and seasonal businesses could be eligible for 3.5 times the average monthly payroll costs.
How to Apply for a PPP Loan
If you are applying for the PPP loan for the first time, find a participating lender and apply for free. You can find a lender via Lender Match or view all lenders near you on a map. The second PPP loans will have the same terms.
Ensure you download and fill in all the required documents a lender request from you after applying for the funding. Lender Match can also connect businesses looking to secure a Second Draw PPP loan.
You have till May 31, 2021, to apply for a PPP Loan. So, if your business is eligible for a PPP loan, apply through a participating lender today!
Bottom Line
The PPP funding is an extension of the U.S. Small Business Administration. It allows small businesses affected by the pandemic to access financial aid to continue their business operation.
If you’re having a hard time keeping your business afloat, apply for Paycheck Protection Program funding today. The money can help you keep your workers on the payroll and maintain your business operations.
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Apply for a PPP loan now through a lender. Apply as soon as you can before the deadline of May 31, 2021.
