How to know if your business is eligible for PPP loans
- Paycheck Protection Program (P3) applications open with small lenders on Friday and all lenders on Tuesday, January 19.
- PPP loans are part of the latest stimulus for American small businesses that changes several requirements as of the summer, in favor of very small businesses.
- Business owners will need to pay close attention to these updates to ensure that they are still eligible to apply for PPP loans.
- The biggest change from the CARES Act is that businesses applying for a second loan must have 300 or fewer employees, up from 500 or fewer previously.
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The Paycheque Protection Program (PPP) is reopening to small business owners in need of financial relief during the pandemic.
The Small Business Administration (SBA) first opened applications from community lenders earlier this week and will open applications from small lenders with $ 1 billion in assets or less on Friday, January 15. Applications from all other lenders will open on Tuesday, January 19.
Businesses hoping to receive PPP loans this time around will need to pay close attention to the new eligibility and forgiveness requirements. Experts say guidelines are clearer this time around, because lawmakers have fixed many flaws in the CARES Act, but the language is more complex.
We have broken down five major changes you need to know before applying for PPP loans.
1. Only companies with 300 employees or less are eligible for a second loan
During the first wave of relaunch in April, several large companies and franchises received backlash for taking out PPP loans. Many small business owners were concerned that large income-generating businesses would receive help intended for them.
In this second stimulus bill, lawmakers restricted who qualifies in order to fix this problem. If your business did not receive a loan in the first round, you will follow the same guidelines as you should have 500 employees or less. If you are applying for a second PPP loan, your business must have 300 or fewer employees.
Your business must be in business by February 15, 2020 to be eligible for PPP loans. Sole proprietors can apply using their salary or earnings capped at $ 100,000 per year to calculate salary costs.
Additionally, publicly traded companies are not eligible for a first or second loan.
2. Non-profit and press organizations are now eligible
This cycle added several classifications of companies not included in the CARES law.
Eligible businesses now include:
- small businesses with 300 or fewer employees
- not-for-profit organizations with 300 or fewer employees
- veterans organizations
- tribal businesses
- housing cooperatives
- self-employed workers
- sole owners
- independent contractors
- press organizations
- and small agricultural cooperatives
3. You must demonstrate a loss of income of at least 25%
Eligible businesses applying for a second loan must demonstrate a reduction of at least 25% in gross revenue in the first, second or third quarter of 2020 compared to the same period in 2019. There are alternative calculations for seasonal businesses. and businesses launched after 2019..
4. Catering and accommodation businesses can borrow larger loans.
Businesses in the restaurant and accommodation sectors, particularly affected by the closures imposed by the government, will be able to borrow larger loans. The new PPP cycle allows these companies to receive up to 3.5 times their average monthly salary costs instead of the usual 2.5 times.
To determine if you qualify, your business must have a NAICS code starting with 72.
5. Improved access for businesses run by women and minorities
Another problem with the CARES law was the limited amount of funds given to women-owned and minority-owned businesses, which further highlighted long-standing inequalities in the banking sector. An investigation found that only 12% of black and Latino owned businesses received the funding they requested.
This time around, the stimulus bill allocates $ 40 billion in PPP funding to businesses with 10 or fewer employees, as well as those located in low to moderate income neighborhoods for loans of up to 250,000. $. An additional $ 15 billion is earmarked for community lenders to provide loans to minority-run businesses. This means that more lenders will be forced to work with contractors who were overlooked in the first round.