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PPP loans: small businesses can start applying for new loans today



The wage protection program will reopen on Monday. But initially, it only applies to companies applying for community financial institutions.Those ones They are banks and lenders that provide funding for small businesses in underserved communities, many of which had difficulty obtaining loans during the previous round of PPP loans or did not apply.

The U.S. Treasury Department and the Small Business Administration said they will open the program to all small businesses as soon as possible. Although there is no exact date yet, the American Consumer Bankers Association stated that it is expected to happen sometime in the week of January 1

8.

The latest relief package signed by Covid at the end of December includes US$284 billion for additional loans to eligible businesses (including those that have received loans a few months ago).

The plan also includes measures designed to make PPP loans more flexible for all small businesses, more useful for hard-hit restaurants, and more accessible to micro businesses, which are more effective than the previous two rounds of loans.

The program has changed the following six methods in the latest round:

Companies can now obtain a second PPP loan. Companies that received PPP loans when the plan first took effect can now apply for the “second draw”, as long as they are not listed companies, employ no more than 300 employees, and have used or will fully use their first PPP loans for authorized purposes , Compared with the same quarter in 2019, total revenue in the first, second or third quarter of this year can be reduced by at least 25%.

Target funding is being provided to the most vulnerable companies. The specific amount ranges from US$15 billion to US$25 billion and is dedicated to community development financial institutions-usually providing loans to minority businesses in underserved communities-and businesses with fewer than 10 employees and low-income areas .

Restaurants can get more loans. As before, most eligible companies can obtain loans equal to 2.5 times their average monthly salary expenditure. But restaurants and lodging companies can now apply for loans equivalent to 3.5 times the monthly salary.

However, any loan cannot exceed US$2 million, and the previous limit was US$10 million.

There is greater flexibility in how to use the loan and still waive the loan completely. To completely waive any PPP loan, at least 60% of the money must be spent on salary expenses. However, compared with the initial rounds of PPP loans, the remaining 40% or less of the funds can be used to pay for a wider range of business expenses.

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

The process of forgiveness is simpler. In order to waive PPP loans, companies that borrowed $150,000 or less only need to submit a one-page certificate, which includes the number of companies retained by the loan and an estimate of the loan amount. Spend on payroll and loan totals. The borrower must also prove that the information is accurate and meets the loan requirements.

This should help many small businesses that obtained PPP loans in the earlier loan cycle. According to the Small Business Administration (Small Business Administration), 87% of all loans are less than $150,000.

The tax relief for recipients of PPP loans is even greater. If these loans are used for authorized purposes, these loans are tax-free to the payee, but the latest Covid relief plan further makes this money sweeter.

Companies usually deduct wages and operating expenses from their total income. Now, even if most of these expenses are paid by tax-free loans, they can still be deducted.

For more information about relaunching the program and making changes to it, the U.S. Treasury Department and the Small Business Administration issued guidelines here on Friday.

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