You Still Have Time to Apply for PPP Loan

Time is ticking for companies to access the Small Business Administration’s Paycheck Protection Program.  Lenders do not expect the program to run out of money (totaling nearly $165 million) before the March 31st expiration date.

The American economy has been severely impacted by the nation-wide closure, which has hit small businesses, owners, and employees. We have compiled relevant information on new funding opportunities for PPP loans, how to get your business money and, how to get forgiveness for your PPP loan(s).

 

Beware of the March 31st deadline.

 

First Draw Paycheck Protection Program Loans.

  • Available for eligible businesses that did not receive a PPP loan previously.

  • PPP loans have an interest rate of 1%.

  • Loans have a maturity of five years.

  • Loan payments will be deferred for borrowers who apply for loan forgiveness until SBA remits the borrower’s loan forgiveness amount to the lender.

  • If a borrower does not apply for loan forgiveness, payments are deferred ten months after the end of the covered period for the borrower’s loan forgiveness (either eight weeks or 24 weeks).

  • No collateral or personal guarantees are required.

  • Neither the government nor lenders will charge small businesses any fees.

Eligible entities for First Draw.

  • Sole proprietors, independent contractors, and self-employed persons.

  • Any business, 501(c)(3) non-profit organization.

  • 501(c)(19) veterans’ organization.

  • Tribal business concern (sec. 31(b)(2)(C) of the SB Act) with the greater of:

    • 500 employees, or

    • That meets the SBA industry size standard if more than 500.

  • Any business with a NAICS code that begins with 72 has more than one physical location and employs less than 500 per location.

Second Draw Paycheck Protection Program Loans.

Establishes a new round of PPP loans for eligible businesses.

  • The maximum loan amount for a second loan is $2 million.

  • This loan program applies to small businesses with 300 or fewer employees and a 25% revenue loss in any quarter of 2020 compared to that same quarter in 2019.

  • The total amount of a first PPP loan must be used before a second PPP loan is distributed.

  • Eligible Businesses that did not previously obtain a PPP loan qualify for the original PPP product and do not need to be eligible under heightened Second Draw eligibility provisions.

  • Loans $150,000 or less do not have to provide documentation on the 25% revenue loss until they apply for forgiveness.

Paycheck Protection Program Revamped Loan Forgiveness

  • A borrower can apply for forgiveness once all loan proceeds for which the borrower is requesting forgiveness have been used.

  • Borrowers can apply for forgiveness any time up to the maturity date of the loan.

  • If borrowers do not apply for forgiveness within ten months after the last day of the covered period, then PPP loan payments are no longer deferred, and borrowers will begin making loan payments to their PPP lender.

  • Forgivable expenses have been expanded and include software and cloud computing for operations supplier costs, investments in facility modifications and personal protective equipment to operate safely, costs incurred to provide PPE and/or adaptive instruments to comply with federal, state, or local safety regulations related to COVID-19. These expenses are not retroactive to the original first PPP loan program.

Payroll means:

Payroll is the same as defined in the CARES Act with one new addition (noted below):

  • Salary, wages, commissions, or similar compensation.

  • Payment of cash tips or equivalent.

  • Payment for vacation, parental, family, medical, or sick leave.

  • Allowance for dismissal or separation.

  • Payment is required for employee benefits, including insurance premiums (employer cost) or any retirement benefit (employer cost).

  • Payment of State or local tax assessed on the compensation of employees.

  • New: group benefits for group life, disability, vision, or dental insurance.

Special rules of Self-employed.

  • Independent contractors and the self-employed with no employees may qualify based on 2.5 months of net profit (capped at $100,000) on their Schedule C tax form (line 31) for 2019 or 2020.
  • As of March 3rd, 2021, self-employed applicants may choose to use gross income (line 7) on their Schedule C.
  • (Second draw PPP loan borrowers may use 3.5 times net profit or gross income if the business NAICS code begins in 72.)
  • There is also a new alternative calculation for self-employed Schedule C filers with employees.
  • The new calculations only apply to businesses whose PPP loan applications have not already been approved.

Conclusion

Apply now. Make your PPP loan application a priority. Find the time to either take advantage of now if you have not applied for a PPP loan. Apply to more than one leader, if not initially approved. Get your money now!!

 

Plan! Adapt! Manage! Succeed!

 

AccuComp Enterprises is a team of experienced business mentors and advisors providing insights and knowledge to small business owners and entrepreneurs. 

Contact us at m.parces@accucompenterprises.com. We are all in this together!