Additional funding allocated for the Paycheck Protection Plan (PPP), an SBA-backed forgiveable loan program established in the CARES Act for pandemic relief, offers small business owners that weren’t approved for the first iteration another chance to apply. It also allows businesses that have exhausted previous PPP money and have been significantly impacted by the pandemic to apply for a second draw. In addition, it makes forgiveness easier for businesses that use the majority of the money for payroll and makes the loans tax-free.
Many businesses were left scrambling upon the first go-round of PPP, trying to determine which paperwork was needed and how the plan actually worked. Since then, and with a framework and guidance from the SBA, here is some helpful information for those applying for a first time loan, or a second time:
For a first time PPP loan:
If you were rejected in the first round or didn’t receive funds, you have a chance to apply again for an initial PPP loan. This time, loans are capped at $2 million as opposed to $10 million previously, but businesses with up to 500 employees are still eligible.
Many small businesses and self-employed individuals were disappointed in the first go of PPP because they didn’t have their books in order, This time, the new bill is much more comprehensive about what is needed. That means businesses and the self-employed should have their tax return materials on file, payments for rent and utilities as well as payroll information and employment records.
Some additional tips - Work with your tax professional on this. Over the past 9 months, they have become well-versed on PPP. Also, if rejected the first time, go back to the lender where you applied and see what prevented you from getting approved, which can help you shore up your application for the second round.
For a second PPP loan:
The new law also allows some businesses to apply for a second loan. To qualify, businesses must have spent all of their first loan, have less than 300 employees and prove that they lost 25% or more of revenue in any quarter in 2020 either on a quarterly or annual basis.
That means businesses will generally need to have their 2019 tax return on hand as well as profit and loss records to show that they’ve had at least one quarter where revenue fell 25% or more. A tax professional will be able to help businesses make sure they’re eligible and have the correct documentation.
These second loans will be made on a similar recommendation to the first round of PPP – 2.5 times payroll costs – and will also be capped at $2 million.This will be especially helpful for small businesses hit hardest by the pandemic, including industries such as restaurants and hotel.
To be sure, the first iteration of PPP fell short in many ways. Still, experts recommend that businesses that need more help apply for the second round if they are eligible. Experts also pointed out that while it’s unclear how forgiveness for the second round will shake out, the new bill generally has made the process easier.
Here is a direct link to the Small Business Administration's Paycheck Protection Program page, which you'll find ways to connect with lenders, which loan is right for you, loan forgiveness information and other resources. PPP loans for businesses are available - find out how to access them.
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