How Can PPP Loans Help Small Business Owners?
It’s been tough for businesses to survive the economic downturn this past year. In 2020, nearly 100,000 small businesses were forced to permanently shut down. While restaurants, bars, and nightlife venues have been hit the worst, some local retail stores are unable to make ends meet. To prevent further businesses from closing down, the government introduced the Paycheck Protection Program (PPP). You can learn more about how this loan helps small businesses by searching online.
It’s important for small business owners to know about the deadline when applying for a PPP loan. To learn more about how to qualify, start an online search.
Here’s how PPP loans can help small business owners.
What Is a PPP Loan?
The Paycheck Protection Program provides small businesses with an incentive to keep their employees on payroll. According to the U.S. Department of Treasury, the program provides small businesses with the money to pay up to eight weeks of payroll costs including benefits. In addition to payroll, businesses can use the funds to pay for rent, utilities, and interest on mortgages.
The PPP was established under the CARES ACt and implemented by the Small Business Administration. NerdWallet says first-time loans are capped at 2.5 times average monthly payroll costs at a maximum of $10 million.
Loans are being offered with a one percent fixed interest rate. To qualify, businesses must have been running by February 15, 2020. Small businesses, sole proprietors, self-employed workers, independent contractors, and side gig workers are eligible to apply for a loan.
The Biden administration made some changes to the program to make it easier for residents to apply. Now, small business owners with federal student loans or non-fraud felony convictions are eligible. The government also prioritized businesses with 20 or fewer employees for two weeks starting February 24.
Second Draw PPP Loans
It’s possible for businesses to reapply and receive a second PPP loan. Those eligible can receive a second PPP loan under the same general loan terms as their first loan. The intended purpose for the money is still for payroll costs, benefits, rent, uninsured property damages, and other authorized uses.
The terms for a second loan are the same regardless of lender or borrower. To qualify, the U.S. Small Business Administration says you must meet the following criteria:
- Previously received a First Draw PPP loan and will or has used the fill amount only for authorized uses;
- Has no more than 300 employees, and;
- Can demonstrate at least a 25 percent reduction in gross receipts between comparable quarters in 2019 and 2020.
For businesses receiving second PPP loans, the loan is 2.5 times average monthly payroll guideline or payroll costs up to $2 million. Accommodation and food service industries can borrow up to 3.5 times average monthly payroll costs.
How to Apply for a PPP Loan
If you have not yet received a PPP loan, then you can apply as a first-time applicant. You can apply through a participating lender until the deadline. There is no fee to apply for a PPP loan.
You can connect with a lender through Lender Match. After two days, you will receive an email with contact information of lenders who are interested in your loan. All new first-time loans will have the same terms.
Make sure to download and complete all the necessary forms a lender will request from you after applying. Lender Match can also connect those seeking a second PPP loan to a lender.
The official deadline for businesses to apply for a PPP loan is March 31, 2021. The Wall Street Journal reports the House of Representatives is working to extend the deadline to May 31, 2021 instead. This will give businesses two more months to apply and provides the Small Business Administration extra time to process the loans.
Learn More About This Program Online
The Paycheck Protection Program was designed to help small businesses struggling because of the economic downturn. If you need assistance keeping your business afloat, a PPP loan might be able to help you out. You can use the funds to pay your employees and cover other necessary expenses.
Start an online search to learn more about PPP loans. Until the legislation to extend the deadline is approved by the Senate, the deadline is March 31. Apply as soon as you can and keep up with the changes surrounding this loan by searching online.