The US Treasury and the Small Business Administration said they would open the program for all small businesses soon. Although there is no exact date yet, the Consumer Bankers’ Association said it expects this to happen sometime during the week of January 18.
Covid’s last aid package signed into law in late December included $ 284 billion for additional loans to eligible companies, including those that had already received a loan months ago.
Here are six ways the program has changed in this last round:
Companies can now obtain a second PPP loan. Companies that obtained a PPP loan when the program came 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 fully use their first PPP loan for uses authorized, with a drop of at least 25% in gross revenue in the first, second or third quarters of this year in relation to the same quarter of 2019.
Targeted funds are being made available to the most vulnerable companies. Specific amounts – ranging from $ 15 billion to $ 25 billion – are earmarked for community development financial institutions – which typically lend to minority-owned companies in underserved communities – and to companies with less than 10 employees, as well as those on low – income areas.
Restaurants can obtain larger loans. Most qualified companies can obtain a loan equal to 2.5 times their average monthly payroll expenses, just as before. But restaurants and lodging companies can now apply for loans equivalent to 3.5 times the monthly payroll.
No loan, however, can exceed $ 2 million, below the previous $ 10 million limit.
There is greater flexibility in how the loan can be used and 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 was the case during the initial rounds of PPP loans.
In addition to mortgage interest, rent and utility payments, the loan can now be used to cover the costs of personal protective equipment and other expenses incurred to meet Covid’s restrictions, as well as certain operations, property damage and costs of Providers.
The process of forgiveness is simpler. For a PPP loan to be forgiven, companies that borrowed $ 150,000 or less will simply need to submit a one-page certification that includes the number of employees the company hired as a result of the loan, an estimate of how much of the loan was spent on payroll payment and total loan amount. Borrowers must also certify that the information is accurate and that they have met the loan requirements.
This should help many small businesses that have obtained PPP loans during previous loan rounds. 87% of loans were below $ 150,000, according to the Small Business Administration.
The tax reduction for beneficiaries of PPP loans has just increased. Although loans are tax-free for beneficiaries if used for authorized purposes, Covid’s latest aid package sweetened the pot even more.
Companies typically deduct payroll and operating expenses from their gross revenue. Now, even if these expenses were largely paid for by the tax-free loan, they will still be tax deductible.