The Paycheck Protection Program is back and supposedly better than before, helping small businesses stay open during the pandemic. If you didn’t make the first cut or were confused by what was required and/or offered, here’s your second chance to get funds to help you stay afloat. Here’s what you need to know.
The Requirements
Businesses eligible for the second round of PPP loans must meet one or more of these requirements:
- Proof of at least a 25 percent revenue deduction in any 2020 quarter versus your 2019 revenue for the same quarter
- Proof you expended all or most of the first round of your PPP loan if applicable
- Proof you have 300 employees or fewer
If you didn’t receive a PPP loan in 2020, the requirements differ slightly:
- Proof you started your business before February 15, 2020
- Prove you have no more than 500 employees
- Proof you are still open and operating despite the pandemic
Proving the 25% Revenue Reduction
Businesses have two ways to prove the 25 percent revenue reduction, which is a requirement if you received the first round of PPP loans:
- Prove your gross annual revenue was at least 25 percent lower in 2020 than in 2019
- Choose a specific quarter from 2020 versus 2019 and prove the revenues decreased at least 20 percent for that quarter
How can you Use the PPP Funds?
The first round of PPP funds was limited to payroll, rent, and utility expenses.
The second round of PPP loans has looser guidelines and may be used for:
- Operating expenses
- Property damage costs (e.g., from public disturbances)
- Supplier costs
- Purchase of PPE for employees
Loan Forgiveness
The loan you receive and the amount that’s forgivable may vary. The forgiveness rules for the second round are similar to the first.
You must use at least 60 percent of the funds for payroll and your staffing level must be similar to the staffing levels before the pandemic. Any remaining funds beyond the 60 percent used on payroll must be spent on eligible operating expenses to keep the business running.
Businesses must apply for forgiveness when they expend all loan proceeds and before the loan’s maturity date. Businesses that don’t apply for forgiveness within 10 months of the covered time must make payments on the loan.
You apply for PPP forgiveness through the lender providing the PPP loan.
Ensure you Qualify Before Applying
The first PPP round was questionable as many businesses who claimed were ‘small businesses’ technically didn’t qualify for the loan.
The second round has tighter restrictions for qualifying and threatens an audit and legal trouble if the loans were taken under false pretenses.
If you’re a small business struggling and you meet the above requirements, contact your local bank authorized to offer the PPP loans and see if you qualify. It’s the best way to keep your company afloat while we navigate the rest of the pandemic throughout 2021.
