The U.S. Treasury and the Small Business Administration said they will open the program to all small businesses soon. Although there is no exact date yet, the Association of Consumer Banks said it expects it to happen sometime in the week of January 18th.
Covid’s latest relief package signed into law in late December included $ 284 billion for additional loans to eligible companies, including those that already received a loan months ago.
Here are six ways the program has changed for this last round:
Now companies can get a second PPP loan. Companies that obtained a PPP loan when the program went into effect can now apply for a “second draw,” as long as they are not a public company, do not employ more than 300 people, have used, or will make full use of their first. PPP loan for authorized uses and may show at least a 25% decrease in gross revenue in the first, second or third quarter of this year compared to the same quarter in 2019.
Specific funds are made available to the most vulnerable companies. Specific amounts, ranging from $ 15 billion to $ 25 billion, are earmarked for community development financial institutions, which are usually lent to minority-owned businesses in underserved communities, and for businesses with less than 10 employees, as well as for those who have a low-income areas.
Restaurants can get bigger loans. Most eligible companies can get a loan equal to 2.5 times the average monthly payroll expense, just like before. But now restaurants and hosting companies can apply for loans equal to 3.5 monthly payrolls.
However, no loan can exceed $ 2 million, below the previous $ 10 million limit.
There is more flexibility in how the loan can be used and it can still be fully forgiven. For any PPP loan to be fully forgiven, at least 60% of the money must be used for payroll expenses. But the remaining 40% or less can be used to cover an even wider range of business expenses than during the first rounds of PPP loans.
Beyond mortgage interest payments, rents and utilities, the loan can now be used to cover the costs of personal protective equipment and other expenses incurred to meet Covid restrictions, as well as some transactions, property damage and supplier costs.
The forgiveness process is simpler. In order to forgive a PPP loan, companies that have lent $ 150,000 or less will only need to submit a one-page certification that includes the number of employees the company retained as a result of the loan, an estimate of the amount of the loan spent on payroll and the total amount of the loan. Borrowers must also certify that the information is accurate and that they meet the requirements of the loan.
This should help many small businesses that obtained PPP loans during the first rounds of loans. According to the Small Business Administration, 87% of loans were below $ 150,000.
The tax cut for PPP loan recipients has increased. While the loans will be tax-free for recipients if used for authorized purposes, Covid’s latest relief package further sweetened the pot.
Typically, companies deduct their payroll and operating expenses from their gross income. Now, even if these expenses have been largely paid for by the tax-free loan, they will still be deductible.