The Paycheck Protection Program, that was initially opened only to first-time borrowers, was fully reopened on Tuesday, January 19, 2021.
Although the federal government backs the loans, the money is issued by financial institutions. Most lenders that participated in the earlier rounds are expected to do so again. Congress authorized another $284 billion in January 2021 for the PPP program to provide a second round of forgivable loans to small businesses as part of its more comprehensive $900 billion COVID relief plan.
At least $40 billion has been set aside for businesses with 10 or fewer employees and for loans under $250,000 in low-income areas.
While the eligibility formula is the same for first-time applicants, only businesses with 300 employees or fewer are eligible to receive a second loan. The PPP second loam will be capped at $2 million. Borrowers seeking a second forgivable loan also need to prove that they saw a 25% reduction in gross receipts during a quarter in 2020 compared with the same quarter in 2019.
Second-time borrowers that are taking loans of $150,000 or less will not have to immediately provide documentation proving a 25% reduction in receipts and can do so before they apply for forgiveness, according to the rules. Second Draw PPP Loan will have the same general loan terms as their First Draw PPP Loan.
Businesses will still be required to spend at least 60% of the money on maintaining payroll in order for the government to forgive the full loan. The remaining 40% can be spent on operating costs such as mortgages, rent and utilities.
The US Senate voted to pass legislation extending the Paycheck Protection Program application deadline by 60 days. The PPP Extension Act of 2021 shifts the PPP application deadline from March 31 to May 31 and provides an additional 30 days for processing applications received by May. The legislation will now be sent to the president for his signature.
Please visit the Small Business Administration website for more information.
