Paycheck Protection Program 2.0: Specifics of Applying for a PPP Loan

The purpose of the Paycheck Protection Program is to help small businesses repay wages and cover operational expenses. Small businessmen are eligible to apply for their 1st or 2nd PPP loan until May 31, 2021. Besides, a prolongation of the deadline accepted by Congress on March 25 allows lenders until June 30 to handle the remaining PPP requests.

On February 22, the president’s administration declared that it would adjust the calculating method for the amount of credit for the self-employed, which will allow individual entrepreneurs and independent contractors to get a bigger amount of loan than was previously possible.

However, until March 5, the SBA did not accept requests using the new calculating method, which was based on gross income instead of net profit. Those borrowers who got a PPP loan before that date have got a much smaller loan and are not eligible to change it.

Paycheck Protection Program 2.0: Specifics of Applying for a PPP Loan

So, let’s go over the known specifics of the 2nd round of PPPs.

Who is Eligible for a New PPP Loan?

The 1st loans are accessible to a bigger amount of borrowers if they have been operating starting from February 15, 2020. News media agencies with no more than 5 hundred workers per location are now also eligible for the loan. Nonprofits and targeted marketing organizations can also apply for the loan if they meet lobbying and size requirements.

Individual entrepreneurs, self-employed workers, and independent contractors or side gig workers are also eligible.

Publicly traded companies are excluded from the 2nd round of PPPs.

A share of the funding now goes to help certain groups that are in financial distress:

  • Grants for live entertainment venues and organizations, museums, and cinemas, whose income decreased by 25%. Grantees are also unable to obtain PPP loan
  • Loans made through community financial institutions and some small depository institutions
  • Money for borrowers with 10 or less employees and loans of less than $250,000 in low-income areas

The adjustments accepted on February 22, 2021, remove additional restrictions so that business owners with delinquent federal student loans or non-fraud-related criminal convictions are now eligible for Paycheck Protection Program loans.

Who Can Obtain the 2nd PPP Loan?

The new agreement provides funding for the 2nd PPP loan for eligible businesses.

2nd loans can be provided to previous borrowers if they have fewer than 3 hundred employees and their gross income decreased by 25% in any quarter of 2020 relative to the same period of 2019.

How Much Money is Possible to Obtain?

1st loans are still limited to up to 2.5 average monthly payroll costs, up to a max of $10 000 000.

The maximum amount of a 2nd PPP loan is $2 000 000, and usually 2.5 times the average monthly payroll costs. But businesses in the hard-hit accommodation and food service sectors can take out loans that are 3.5 times the average monthly payroll costs.

On February 22, 2021, the president’s administration announced changes to the formula for calculating loans for self-employed professionals, many of whom were only eligible for a small amount or were completely excluded from previous rounds. The specifics of the changed formula are not yet known.

How Can the PPP Loan Be Used?

Eligible expenses have been expanded for all loans to include software; provider expenses; protective equipment and workspace modifications following medical guidelines; and damages for 2020 public disturbances that are not covered by insurance.

The law notes that group insurance payments provided by the employer are attributable to payroll costs, including life insurance, disability, vision, or dental insurance.

PPP loans are aimed at covering payroll and operating expenses, for example, rent and utilities.

What are the Rates and Terms?

Loans are given at a 1% fixed interest rate. The applicant does not have to submit collateral for the loans, and there is no payment fee for the application for the loan.

How to Apply for a Loan?

To apply for a new PPP loan is possible through any of the following lenders:

  • Lendio
  • SmartBiz
  • Funding Circle
  • Credibly
  • Fundera
  • BlueVine
  • Celtic Bank Small Business Loans
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