And like with the first round, new regulations are certain to be forthcoming, especially around the outstanding issue of audits for borrowers over $2 million. To be eligible for a first-draw PPP loan: There are indeed additional checks coming for parents, but this post gets the details wrong. Congress recently passed the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, in part to reauthorize the Paycheck Protection Program (PPP) that ended in August 2020. Following guidance from the U.S. Small Business Administration (SBA) and Treasury Department, community financial institutions including Community Development Financial Institutions (CDFIs) began making first-draw PPP loans on Mon., Jan. 11, and second-draw loans on Wed., Jan. 13. "Paycheck Protection Program Second Draw Loans. Small Business Administration. The maximum funding amount for the SBA Express loan which offers a faster turnaround time than standard 7 (a) loans has also been permanently set at $500,000, up from its pre-pandemic. The claim that a fourth stimulus payment worth $2,000 per person will arrive by Memorial Day weekend is FALSE, based on our research. Similar to your first PPP loan, for the second loan you can receive up to 2.5 times your average monthly payroll costs, which are calculated for the 12 months prior to the loan or for the calendar year of 2019. "Paycheck Protection Program Second Draw Borrower Application Form.". PPP loan recipients could use up to 40% of loan proceeds for non-payroll costs, although the list of authorized uses did limit non-payroll spending. The Economic Aid Act also expanded the list of businesses that are now eligible to receive PPP loans. Congressional Research Service. There are a couple important caveats that second time borrowers should be aware of: 1) If you received a Shuttered Venue Operator Grant, you wont be eligible for the second PPP draw and 2) If your business has multiple locations, you cant employ more than 300 employees per location to be eligible. Congress later provided an additional $320 billion for the PPP in H.R.266, the Paycheck Protection Program and Health Care Enhancement Act (Round Two). As of Sunday, the PPP had given out nearly 10.8 million loans worth more than $780 billion since April of . These loans mature after five years. The Paycheck Protection Program was first passed by Congress in spring 2020 as part of the first round of coronavirus relief in response to the pandemic. Given that there were more than 11 million PPP loans issued in 2020 and 2021, it was inevitable that a substantial number of forgiveness applications would be denied based on borrower errors. You need to have proof you spent your funds correctly in case you get audited. Partners Bancorp Reports Results of Operations for the Fourth Quarter and Full Year 2022 . Under the new legislation, the SBA is getting over $284 billion in funding for first and second-time PPP loan borrowers. COVID-19 Resources. Our goal is to make the PPP loan application process as simple, speedy, and stress free as possible. Opinions expressed by Forbes Contributors are their own. Unlike the PPP loans, which can be forgiven for eligible borrowers, these loans must be repaid within 30 years, and they have fixed interest rates of 3.75 percent for businesses and 2.75 percent for non-profits. President Joseph R. Biden signed the American Rescue Plan, a $1.9 trillion stimulus package, into law on March 11, 2021, after Congress passed it. Any PPP loans that were issued in 2020 and 2021 were required to be repaid, unless you qualified to have yours forgiven. Your assets will also not be reduced as a result of the loan forgiveness. You may opt-out by. For a First Draw PPP Loan, that certification means that the borrower has no more than 500 employees, is a small business concern as defined in section 3 of the Small Business Act (15 U.S.C. The first round tabulated payments based on farmers' net income, which is income after deductions and expenses. For borrowers in the Accommodation and Food Services sector (use NAICS 72 to confirm), the maximum loan amount for a Second Draw PPP loan is 3.5x the average monthly 2019 or 2020 payroll costs up to $2 . You also have to fit into one of the following groups: Your business can receive up to 2.5 times your average monthly payroll costs (for the 12 months preceding the date the loan starts or for the calendar year of 2019 or 2020). The extension only applies to PPP loans. Everything You Need to Know About PPP Loans in 2021, Updated: "Many of our businesses were being turned down in the first and second round of funding. To get prepared for a PPP loan, its critical to read up on the latest eligibility requirements and terms so you know where you stand and how to prepare. The same legislation that authorized the third round of direct payments in March . 266 - PPP and Health Care Enhancement Act, H.R. . That means having suffered at least . The only exception is if your business has a NAICS code beginning in 72. The simplest method to do so, according to the regulations, is to submit 2020 and 2019 tax returns if available. "The Paycheck Protection Program Is Out of Money. The SBA also issuedGuidance on Accessing Capital for Minority, Underserved, Veteran, and Women-Owned Business Concernsin an effort to address the main criticism of the initial PPP. Have already used or will use the full amount of their first PPP loan. One change had a set term of two weeks. Under the new legislation, the SBA is getting over $284 billion in funding for first and second-time PPP loan borrowers. Covered Period for Third-Round PPP Round one and Round two PPP loans stipulated that the period during which a business had to use its loan proceeds (the covered period) was an. 2020, PPP loans were meant to provide needed relief to businesses faced with shutdowns during the pandemic. If you werent in business at all in 2019, but were operating before February 15, 2020, you can compare Q1 of 2020 with either Q2, Q3, or Q4 of 2020 to determine where your gross receipts dropped by at least 25%. The Paycheck Protection Program is back with new eligibility requirements and terms. As required by the Economic Aid Act, the form . For Many Retailers, Rent Relief Is Key to Surviving COVID-19. The new program will open as soon as lenders can reestablish the process, and it expires on March 31, 2021. Please enter valid email address to continue. To be forgiven, you must spend the remainder of your funds before September 30, 2021. Business owners with delinquent federal student loans were eligible for a PPP loan. Not sure where to start? Congress has also updated other aspects of the PPP, including the following: Under the original Paycheck Protection Program, business owners could get their loans partially or fully forgiven if they spent their funds on payroll costs, utilities, rent, and mortgage interest payments. 5/3/2021 Dana Fried. While businesses can apply for PPP loan forgiveness, the program for new loans closed at the end of May. "Business Loan Program Temporary Changes; Paycheck Protection Program Second Draw Loans," Page 6. Vikki Velasquez is a researcher and writer who has managed, coordinated, and directed various community and nonprofit organizations. ", Small Business Administration. With PPP2 loans, there will be expanded coverage for expenditures beyond payroll, utilities, rent, and mortgage interest, making it easier to obtain partial or full loan forgiveness. The maximum loan amount across all locations, however, is capped at $4 million. SVOG grants equal to 45 percent of a businesss gross earned revenue, up to a maximum of $10 million, are available for eligible applicants. No. MT. Loans are made by FC Marketplace, LLC, and loans to California residents are made pursuant to its California Financing License (No. The program now officially runs through June 30, 2021. While certain loans are now eligible for the EZ loan forgiveness application, there's greater interest in easing . All rights reserved. If youre a seasonal business, you can count your average monthly payroll costs from any 12-week period of your choosing between February 15, 2019 and February 15, 2020. This guidance outlined the following set-asides for these businesses: The guidance outlines that the SBA will only accept loan applications from community financial institutions for at least two days after the loan portal reopens, and that it will engage in community and public outreach along with a media campaign to promote the program and encourage these groups to apply. Businesses can receive up to 24 months of relief and a maximum loan of $500,000. 504 loans, long-term, fixed-rate financing to purchase or repair real estate, equipment, machinery, or other assets., 7(a) loans, which guarantee portions of the total amount, cap interest rates, and limit fees.. Only certain businesses are eligible to receive a PPP loan, and these specifications are different for first-time loan recipients and second-draw recipients. If you receive a loan of $150,000 or less, you can submit a one-page document to your lender as part of the simplified forgiveness application. "Office of Chief Counsel Revenue Service Memorandum. The new round of PPP loans will be available to three categories of businesses: Every business that applies for a PPP loan needs to have been in operation since at least February 15, 2020 to be eligible. Lantern by SoFi. "The vast majority of businesses waiting for forgiveness have loans under $150,000. There's been widening support for streamlining the PPP forgiveness process, too. Recipients have up to Mar.11, 2023, to use the funds, and they dont have to pay the money back as long as they use it for eligible purposes. Congressional Research Service. Lobbying firms or those engaged in political or advocacy activities; Businesses based in or tied to the Peoples Republic of China; Businesses lobbying or engaging in public relations for foreign clients and required to register their activities under the Foreign Agents Registration Act; Live entertainment venues receiving grants under the Economic Aid Act; Businesses in which the president, the vice president, the head of an executive department, or a member of Congress, or the spouse of such person owns, controls, or holds at least 20%of any class of equity; and. Offers may be subject to change without notice. Half of the 2021 PPP loans have been fully or partially forgiven with payment at $106,612,577,916. The newer Act extended the availability of . Taxpayers plus eligible dependents will each receive $1,400. $15 billion for lending by insured depository institutions, $35 billion for new first-draw PPP borrowers, $15 billion and $25 billion for first-draw and second-draw PPP loans for borrowers with 10 employees or fewer, or for loans of less than $250,000 to borrowers in low-or moderate-income neighborhoods. Note: On January 19, the PPP was opened to all lenders. The other four would be effective until at least the end of March 2021. That was later expanded to 24 weeks. The new regulations do give lenders the ability to request additional documentation from borrowers if they deem it necessary. Married filing joint phaseout begins at $150,000 and ends at $160,000. Funding for the Paycheck Protection Program (PPP) had been replenished with $310 billion after President Trump finalized a 4th crisis relief package into legislation Friday. The interest rate for all loans was 1% and maturity was five years. Second-draw loans of up to $2 million were available for businesses that had used funds in their Round 1 or Round 2 loans. During round 1 of the paycheck protection program, Lufkin Endodontics, Pa requested a PPP loan for $156,400.00. These new groups include 501c(6) organizations like chambers of commerce, nonprofits and religious entities, and local news organizations. The Consolidated Appropriations Act of 2021 (CAA) was signed into law on Dec. 27, 2020 and included new funding for the Paycheck Protection Program (PPP), which expired on Aug. 8, 2020. The maximum loan amount you can receive is $10 million. Disclaimer: This article is updated as of January 22, 2021. "SBA Paycheck Protection Program (PPP) Loan Forgiveness: In Brief," Page 5. Now, to offset these losses and help a greater number of small businesses recover, Congress is amending a handful of terms and requirements around PPP loans. would allow thousands of self-employed Americans to qualify for more aid under the massive Paycheck Protection Program, which. On Monday, December 21, 2020, Congress passed the Consolidated Appropriations Act, 2021 (CAA), which contains a $900 billion COVID-19 Proper Treatment of Improperly Forgiven PPP Loans. The following costs do not count as payroll: To qualify for full loan forgiveness, you need to spend no less than 60% of your total loan amount on payroll costs. The SBA also outlines the businesses that were not eligible to apply for the new round of PPP, including the following: Writ large, the new PPP round has the same requirements for having the loan forgiven and turned into a grant. 43% don't think their business will return to normal until either the fourth quarter or 2022. New first- and second-draw loans followed a pattern similar to that followed with previous PPP loans. As with PPP1 loans, PPP2 loans give qualified businesses a loan of up to 2.5 times their average monthly payroll costs, either determined by the calendar year in 2019, 2020, or by the 12 months prior to the date the application is submitted. Congress has approved three waves of stimulus payments during. Get browser notifications for breaking news, live events, and exclusive reporting. New PPP Rules for Farmers. The survey of 1,293 Goldman Sachs 10,000 Small Businesses participants conducted Feb. 15-16 found that 66% of small businesses qualified for a second PPP loan and 83% of those who qualified have applied for a second PPP loan. If youre self-employed, you can apply for payroll costs based on your net profit for 2020. Even more helpful, businesses, sole proprietors, and independent contractors applying for loans of $150,000 or less and based on the same calculation as round one2.5 times one month of 2019 payrolldo not have to submit new documentation if applying through the same lender. Over the three rounds of PPP loans issued between 2020 and 2021, the SBA disbursed $790,765,202,677 in funding. The table below outlines all three rounds of PPP loan funding. The CAA expanded the types of expenses for which a business could use Round 3 PPP funds. Monday is the last day for small business owners to apply for a federal Paycheck Protection Program, or PPP, loan, in a third round of lending meant to give a better shot at funds to. Businesses that just received their first PPP loan might have time to apply for a Second Draw PPP loan. That caused application fatigue and frustration," Ron Busby, president of the US Black Chambers, told AP. Just 24% were confident they could maintain payroll once their PPP money ran out. The first type was initial or first-draw loans up to $10 million for entities that had never received a PPP loan. Copyright 2023 Market Realist. Does Business Interruption Insurance Cover COVID-19? If you werent in business during Q1, Q2, or Q3 of 2019, but were in business during Q4, you can compare any quarter in 2020 with Q4 of 2019 to determine where your gross receipts dropped by at least 25%. Main Street Lending was a Federal Reserve System program to keep credit flowing to small- and mid-sized businesses and nonprofits during the COVID-19 crisis. However, if you had a hard time getting funding or didnt receive much help throughout the process, it may be time to consider a different lender. The SBA says those loans will continue to be funded. His expertise includes government programs and policy, retirement planning, insurance, family finance, home ownership and loans. As of April 5 th, 2021, the SBA has approved almost 4 million PPP loans for about . The rules refer to first round PPP Loans as "First Draw PPP Loans" and this second round as "Second Draw PPP Loans." . A reduction in over 25% of salaries will result in a commensurate reduction in overall forgiveness. There are plenty of predatory lenders out there looking to take advantage of you, which is the last thing you need while seeking financial assistance. 19. You can likewise get the NASE Growth Grant which provides to $4,000 of complimentary money to NASE members. Here are a few key facts about the first round of PPP loans: Though the program helped countless small businesses stay afloat amid COVID-19 shutdowns and restrictions, the Paycheck Protection Program wasnt a cure-all for the small business economy. It was created by the CARES Act and originally included $349 billion in funding; however, that money was gone within two weeks, resulting in the second round of funding totaling $310 billion. To apply for forgiveness if you receive a loan of $150,000 or less, you have to submit a one-page application to your lender that includes: The SBA has to create a simplified application form within 24 days of the bills enactment, and wont require any other materials from business owners unless theyre necessary to verify a businesss revenue loss. Of the approved amount, Lufkin Endodontics, Pa has received 100% of . While it was clear that a forgiven PPP loan would not be considered income, Treasury guidance did not permit normally deductible expenses paid for by PPP funds to be deductible. The New York Times. The amount of funds made available in the third round totaled $284 billion. Further, for restaurants and hotels with multiple locations, as long as each one has fewer than 300 employees, each individual location may apply for a separate loan. As small businesses continue to weather the pandemic, another relief package containing $285 billion in Small Business Administration (SBA) Paycheck Protection Program (PPP) funds is officially on its way. Unlike the first PPP loans, you dont have to deduct the amount of your EIDL grant from the PPP loan forgiveness amount. These include white papers, government data, original reporting, and interviews with industry experts. Can demonstrate a 25% reduction in gross revenue from any quarter in 2020 compared to the same quarter in 2019. After the PPP loan program ended, the SBA reopened its SVOG (Shuttered Venue Operators Grant) program, which has over $16 billion in grants available for shuttered venues. Shuttered venues include theaters, music venues, and other similar businesses. Just like with the original PPP loans, you cannot count your PPP loan forgiveness amount as part of your businesss gross income. If approved, a business can qualify for a grant equal to 45% of its gross earned revenue, for a maximum of $10 million. In addition, any income tax basis increase that resulted from a PPP loan remained even if the PPP loan was eventually forgiven. Finally, businesses that received PPP loans were not eligible to also take the Employee Retention Tax Credit. Over the three rounds of PPP loans issued between 2020 and 2021, the SBA disbursed $790,765,202,677 in funding. Now businesses are able to get PPP loans and avail themselves of the tax credit, providing they can show a reduction of revenue of 25% or more in a quarter of 2020 over 2019. Here's What to Do. However, if you receive more than $150,000, you have to submit the following: Even if youre eligible for the simplified forgiveness application, its still a good idea to hold onto all your relevant receipts, documents, and accounts from this time. Paige Smith is a content marketing writer who specializes in writing about the intersection of business, finance, and tech. A third round of Paycheck Protection Program (PPP) loans was authorized by the passage of H.R. The new law also carved out additional benefits for restaurants, hotels, and other businesses under the NAICS Code 72. As the IRS continues to distribute the pandemic's third stimulus checks, for up to $1,400 each, the outcry is building for the government to provide Americans with a fourth payment and possibly more.