It’s time to apply for the second round of emergency funding to help your small business stay afloat in 2021. The application for the new round of Paycheck Protection Program funding opened on January 11th and is expected to last through May 31st. However, funding ran out quickly in the first PPP round so it’s a great idea to apply ASAP.
Congress has approved $284.5 billion in new Paycheck Protection Program (PPP) funding. Business and industries eligible for these PPP loans have been expanded under the new bill along with a wider use of proceeds.
Here’s information on the new PPP program and how you can get a 2nd PPP loan for your small business.
The Paycheck Protection Program now allows certain eligible borrowers that previously received a PPP loan to apply for a second PPP loan with the same general loan terms as their first PPP Loan. Second PPP loans can be used for approved expenses and are forgivable if guidelines are met.
Businesses that can demonstrate at least 25% reduction in gross receipts year over year and meet other requirements may be eligible for a second PPP loan.
Business owners must meet the following requirements to qualify:
PPP loans from this round are available to businesses, certain nonprofits, self-employed individuals, independent contractors, sole proprietors, housing cooperatives, small agricultural cooperatives, veterans’ organizations and tribal businesses.
Unlike initial PPP loans, the maximum amount for the second round of PPP loans is just $2 million compared to the first round amount of $10 million.
The formula for second loans under this program is similar to that of initial loans: Business owners can receive up to 2.5 times their average monthly payroll costs. Hotels, restaurants and other accommodation and food service businesses can borrow up to 3.5 times their average monthly payroll costs.
Average monthly payroll costs can be calculated using one of the following:
Your payroll processor can help you crunch the numbers and produce documentation you can use during the application process.
Seasonal businesses: (Typically operating for less than seven months in a calendar year) and new businesses in operation on Feb. 15, 2020, but not open for a full 12 months, will use a separate formula to calculate average monthly payroll.
New businesses: Total payroll costs divided by the number of months those costs were paid out.
Hotels, restaurants and other accommodation and food service businesses: Can borrow up to 3.5 times their average monthly payroll costs.
Congress has expanded the types of expenses for which all PPP loans can be used, which applies to existing PPP loans, unless forgiveness has already been obtained, and new PPP loans.
Previous proceed use for first round of PPP:
Funding could be used for payroll, rent, covered mortgage interest and utilities.
New proceed use for the next round of PPP funding:
The PPP now allows proceeds to be used for:
Yes! As with the first round of PPP, these loans may be entirely forgiven if spent for the proper purposes (primarily payroll) during the proper time period. Currently there are three PPP loan forgiveness applications:
Borrowers can continue to use those forms for PPP loans they received earlier in 2020, unless and until new applications are released. The U.S. Treasury and the SBA are expected to release new loan forgiveness applications.
In addition, there will now be a simplified (but not automatic) forgiveness for loans of $150,000 or less. That means you must take action and get approved for loan forgiveness.
You may. If you returned all or part of your PPP loan, you can apply for an “amount equal to the difference between the amount retained and the maximum amount applicable.” Or, if you did not accept the full amount you may request a modification to allow you to borrow the full amount for which your business is eligible.
The application for the PPP opened on January 11, 2021. To apply for a second PPP loan, businesses will need to submit documents to verify payroll costs and revenue loss, such as tax forms or bank statements. To help you gather and organize the documents that may be required by your lender, read Possible PPP Required Documentation to Apply for a PPP Loan in 2021.
You can avoid some paperwork by using the same lender for your first- and second PPP loan, provided you use payroll figures from calendar year 2019 when applying for the second loan.
Borrowers seeking $150,000 or less don’t need to prove revenue loss when they apply for a second loan but will need to do so to apply for loan forgiveness.
Let SmartBiz help you get ready for the new round of the Paycheck Protection Program (PPP) approved by Congress*. SmartBiz works with small business owners like you every day to help you apply for the funding you need. Since 2013, we’ve specialized in SBA (Small Business Administration) loans. The new round of the Paycheck Protection Program, to be administered by the SBA, provides continued financial support to help eligible small businesses keep their employees and stay open safely during the COVID-19 pandemic.
Start a SmartBiz Loans streamlined application here.
*The availability of PPP loans remains subject to SBA guidance and other factors, including the amount of funding available to banks and the quantity of eligible applicants considered on a first-come, first-served basis. The information provided above is for educational purposes only. Please consult the SBA’s website for actual rules and the most current guidance.