PPP Loans Q&A: Who Gets to Round 2?

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IN Payroll protection program returned.

Between April and August, the program distributed $ 523 billion in government-backed forgiven loans to 5.2 million small businesses to help them keep paying their workers during the economic disruption caused by the pandemic.

It now restarts after Congress has enabled $ 284 billion in new funding in the stimulus package, it passed in December. Most importantly, the program will give the hardest hit businesses a chance to get a second loan.

PPP 2.0 introduces other changes, including eligibility and limits for certain loan sizes. Here’s what you need to know.

The new financing is available for both first-time applicants and returning borrowers.

For first-time applicants, most of the original rules apply. A company or nonprofit organization should typically have 500 or fewer employees, although companies in some industries can get qualified with a large number of employees. Applicants must also confirm that “the current economic uncertainty makes this loan request necessary” to support their ongoing operations.

Due to the recent bill to stimulate participation in the program, there are now more groups, including non-profit housing cooperatives, newspapers, broadcasters and local chambers of commerce.

Applicants must be in process on February 15, 2020 to qualify. Self-employed entrepreneurs, including independent contractors, are also eligible for loans, but this is a rule set by the Small Business Administration. requires individual businesses to be profitable on their 2019 tax return.

rules stricter for those looking for a second loan.

Large business is not eligible: applicants for a second loan must have no more than 300 employees. (Public companies, political lobbyists, and members of Congress are prohibited from receiving a second loan.)

They also have to show some difficulty: a 25 percent drop in gross revenues between comparable quarters in 2019 and 2020. They must also show that they have used all the money from the first loan in a legitimate manner.

Like last year, loans are issued by banks and other lenders. But some lenders got a head start.

Most borrowers can apply starting January 19 with thousands of participating lenders, from big banks like JPMorgan Chase and Wells Fargo to fintech companies like PayPal and Square.

BUT small group of public lenders were able to start accepting applications a few days earlier. These include community development financial institutions, minority depository institutions, and certified real estate developers — designated lenders for low-income populations, including businesses owned by blacks and other minorities.

Banks and credit unions with assets of $ 1 billion or less may begin accepting applications on January 15th.

The deadline for applications is March 31st.

Initial borrowers are eligible to receive payments 2.5 times their average monthly wage, up to a maximum of $ 10 million. (For individual entrepreneurs other calculation… They can borrow 2.5 times the monthly income shown on the Appendix C tax form.

The maximum loan amount for secondary borrowers is $ 2 million. Foodservice and hospitality businesses like restaurants and hotels can borrow 3.5 times their average monthly payroll, but the $ 2 million cap still applies.

Borrowers can be forgiven for the loan if they follow the rules of the program.

At least 60 percent of the loan must be used to pay workers, and the rest must be spent on related expenses. Borrowers can choose how long they want to spend the money if it is eight to 24 weeks.

Notably, borrowers do not need to maintain pre-pandemic headcounts and wages in order to receive loan forgiveness if they I confirm that they had to cut their staff comply with federal guidelines for “sanitation, social distancing or any other work or customer safety requirements related to Covid-19.”

Loans that have not been forgiven have an interest rate of 1 percent and a maturity that is usually five years.

The remaining 40 percent can go to rent, utilities, mortgage interest payments, and other expenses.

The new incentive bill has added several items to the list: payments to suppliers, certain property damage not covered by insurance, protective equipment for workers related to Covid, and the cost of erecting barriers and otherwise modifying spaces in accordance with social distancing guidelines, and others. aspects of health care. mandates.

The best place to start is with the bank you have already used. In the past year, many national banks only accepted applications from borrowers with whom they worked previously.

Most borrowers looking for a second loan will be able to apply through the lender that issued their first loan.

Thousands of local banks and specialized lenders are also involved. Small Business Administration operates Lender Match Program to connect applicants with willing lenders.

More than you might need in the spring.

The exact requirements differ depending on the lender, but candidates usually require copies of their payroll. Many lenders will also request the 2019 business tax return and documents such as incorporation documents or a certificate of state registration of the business.

Those looking for a second loan will need records showing that their sales fell at least 25 percent in the last year’s quarter. Lenders are not required to collect this proof before making a loan of less than $ 150,000, but they must obtain it before the loan is eligible for forgiveness. Most lenders plan to request it during the application process.

In the first round of the program, the Small Business Administration instantly approved lenders’ applications, allowing some loans to be paid off within hours of the borrower’s application. This time the agency added additional checks for fraudand many lenders have stepped up their due diligence as well. Usually, it will take at least a few days from application to payment.

When the program started in April, the money ran out in just 13 days, infuriate applicants who were not allowed… Congress quickly allocated more, which was enough: when the program ended in August, more than $ 120 billion was not spent

This time, Treasury officials believe that $ 284 billion will be enough to fund all eligible applications.

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