PPP Myth vs. Fact 2021

The Small Business Administration (SBA), in consultation with the U.S. Treasury Department, has reopened the Paycheck Protection Program (PPP)* to help small business owners survive and rebuild during the 2020/2021 pandemic.

However, there has been some confusion about the program and how the forgivable PPP loans work. This article addresses myths and facts about the program and how you can apply if PPP funding is for you.

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PPP loan details

The Paycheck Protection Program (PPP) 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.

PPP Loans can be used to help fund payroll costs, including benefits. Funds can also be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations.

For most borrowers, the maximum loan amount of a PPP Loan is 2.5x average monthly 2019 or 2020 payroll costs up to $2 million. For borrowers in the Accommodation and Food Services sector (use NAICS 72 to confirm), the maximum loan amount is 3.5x average monthly 2019 or 2020 payroll costs up to $2 million.

Who may qualify

A borrower is generally eligible for a second PPP loan in this round of PPP funding if:

  • Previously received a PPP loan and will or has used the full amount only for authorized uses
  • Has no more than 300 employees
  • Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020

Where to apply

The PPP is accepting applications through May 31, 2021. However, it’s strongly recommended that you apply ASAP as funding may be depleted before that deadline.

If you’re ready to pursue a first or second PPP loan, SmartBiz can help. Start an application here today!


PPP 2021 myths and facts

MYTH #1: PPP has waste, fraud, and abuse.

FACT: The SBA has a robust process for ensuring PPP funds were used as intended. SBA is committed to rooting out fraudulent activity; any abuser of this important program will be held appropriately accountable. A borrower listed in the data release doesn’t mean that SBA has made an affirmative declaration that a borrower is eligible or that it will receive loan forgiveness. SBA has a process for review and that is ongoing.

MYTH #2: PPP only supported large corporations, not small businesses.

FACT: Of those businesses that received PPP loans, 75 percent have nine or fewer employees. In addition, 87% of all loans, or nine out of ten, were $150,000 or less.

MYTH #3: PPP did not support workers.

FACT: To date, PPP has supported more than 51 million American jobs, and account for more than 80% of small business payroll in the United States. By requiring at least 60% of PPP funds to cover payroll costs, the Administration ensured Americans’ paychecks were protected. The PPP directly contributed to the historic economic recovery we are currently experiencing, keeping unemployment far lower than expected at the peak of the pandemic.

MYTH #4: PPP funds did not reach historically underserved communities.

FACT: The SBA and Treasury worked closely with Congress, borrowers, and lenders of all sizes to make certain the broadest possible segment of small businesses could access the PPP. To ensure funds began flowing as rapidly as possible to all small businesses, particularly those in underserved communities, SBA and Treasury worked closely with lenders that were positioned to reach borrowers who had had less well-established traditional banking relationships. And increased the number of participating lenders from the 1,700 that participated in SBA 7(a) lending in 2019 to nearly 5,500 lenders participating in the PPP.

MYTH #5: You can only receive one SBA loan at a time, so PPP applicants must rescind other SBA loan applications.

FACT: Borrowers may apply for the PPP and other SBA financial assistance, including disaster loans and Section 7(a) loans. However, you cannot use PPP proceeds for the same purpose as your other SBA loan(s). Loan proceeds need to cover payroll for a different period or other qualifying costs. This includes the up to $10,000 grant available with Section 7(b)(2) loans — Economic Injury Disaster Loans (EIDL).

MYTH #6: You can use the PPP loan for rent payments for self-employed individuals.

FACT: Yes, it’s acceptable to use funds for self-employed individuals for business rent payments.

MYTH #7: The eight-week period that determines the amount of forgiveness for the PPP loan begins on the loan approval date.

FACT: The lender must make the first disbursement of the loan no later than 10 days from the loan approval date, but those eight weeks begin on the day the lender makes the first disbursement.

MYTH #8: PPP loan forgiveness is automatic. The borrower does not need to take any action.

FACT: Borrowers must fill out a form to request forgiveness and provide supporting documentation if requested.

MYTH #9: Applying for PPP funding is confusing.

FACT: 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 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. Let SmartBiz help you get ready for the new round of the Paycheck Protection Program (PPP).

Get started to secure PPP funding

Start a SmartBiz Loans streamlined application here.

If you need guidance, this video walks you through the Paycheck Protection Program loan application process, with pointers on what you'll need to complete the application.

*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 website for actual rules and the most current guidance.