The Paycheck Protection Program has been a boon to businesses affected by the pandemic. To say that the COVID-19 pandemic has been tough on businesses, and everyone in general, is truly an understatement. Small businesses, who didn’t have the heavy financial foundation that their bigger business counterparts could count on, were particularly hit hard. Apart from the challenge of keeping their operations afloat, another major challenge was and still is ensuring the continued employment of workforces that buoy up these businesses.
What You Need to Know About the Paycheck Protection Program?
As part of the US government’s assistance programs for businesses heavily struck by COVID-19, the Paycheck Protection Program is effectively a loan that allows small businesses to retain the employment of their workforce. Apart from the clear advantages of ensuring business continuance, there’s also a provision which provides for effective forgiveness or nullification of the loans should: a. All key employment criteria are met, and b. The funds are proven to be used for their intended purpose.
Paycheck Protection Program: The Very Basics
While the Paycheck Protection Program isn’t the perfect program to face down the crises brought about by COVID-19, it’s certainly a major bit of support that many small businesses need to certainly take advantage of. Of particular import to struggling businesses is the fact that the interest rate of PPP loans—which they are—is a miniscule 1%. Even IF your loan isn’t forgiven, which is unlikely if utilized for its intended purpose, it really won’t set you back at all.
The maturity period for the loans depend on when you got them. Prior to June 5, it’s at 2 years. If it’s after—which includes the current run for the Paycheck Protection Program—it’s a really long 5 years. Speaking of loan forgiveness, loan payments get deferred for borrowers who apply for it until the Small Business Administration effectively pays off your long forgiveness amount to the selected lender. Should you not opt for this recourse, payments are deferred 10 months after the end of the covered period for your loan forgiveness—which is either 8 weeks or 24 weeks.)
The Updates with the Second Round
The original run of the Paycheck Protection Program ended on August 8, 2020, but fortunately, outgoing President Donald Trump signed into law the Consolidated Appropriations Act which, among other things, renews the Paycheck Protection Program established by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). With US$ 284.45 billion specifically allocated for a new push for the Paycheck Protection Program, and quite a few updates, many small businesses would do well to hop on—even second-time borrowers.
- Eligibility Updates: If you’re a second-time borrower, you need to have fewer than 300 employees and have experienced at least a 25% reduction in gross receipt during the quarter you applied in 2020 as compared to the very same quarter in 2019.
- Ineligibility Notice: It’s very important to note that businesses actively participating in political and lobbying activities can’t avail of the Paycheck Protection Program. It’s the same thing if they don’t participate these activities but are owned—20% or more whether directly or indirectly by an entity created under the laws of the People’s Republic of China or the Special Administrative Region of Hong Kong. Businesses are also ineligible if they have “significant operations” in those countries—or have a citizen/resident of that country as a board member. This is really in line with current administration’s foreign policy stance on China.
- Loanable Amount: The maximum loan amount available to second-time borrowers is much lower than the original US$10 million allowed for in the initial outing of the Paycheck Protection Program, as it is now capped at US$2 million. To be more specific, borrowers can no borrow up to 2.5 times the average total monthly payroll during the year period to the date that the loan is made or in 2019. That is upped to 3.5 times for those businesses that serve accommodations and food services.
- Eligible Expenses: Apart from actually protecting your payroll, the amount loaned this time around can also be used for relevant business software or cloud computing software that your business might need to get their operations on-track. You can check out the specifics here to check if your needs are allowable.
- Coverage Period/Affiliation: You can choose the length of the period of coverage within which you have to use the proceeds of the your PPP loan to range from between 8 to 24 weeks. Make sure to also refer to the Small Business Administration affiliation rules that are applicable to loans as these are applicable to PPP loaners.
- The Forgiveness Process: If you borrow US$ 150,000 and below, all you need are three things to apply for loan forgiveness:
- Provide the number of employees you were able to retain as a result of the loan.
- Accounting of the estimated amount you spent on your payroll.
- The total amount that you loaned.
- Certification that you complied with all program requirements.
- Applicable records that prove this compliance.
- EIDL Deduction Nullification: This second run of the Paycheck Protection Program negates the need to deduct the proceeds from your Economic Injury Disaster Loan advance from your loan forgiveness amount.
- Increased Loan Amount: You can now also re-apply to get the difference allowed if you were eligible for an increased loan amount under these new rules.
There’s really much that you can benefit from with this new Paycheck Protection Program. If your small business has been struggling, now’s the time to get the help that you need. Remember that you only have until March 31, 2021 to apply for this loan so, get to it!
We’re Here to Help!
If all that sounds a bit confusing to you and your business really needs all the help that you can get, now is a perfect time to get business coaching. At Forward Progression Development, we’re well-equipped and experienced to help you and your business not only apply for the needed funding provided for by the Paycheck Protection Program but get all other assistance that you need to get back on your feet and thrive.
Schedule a meeting with us today and let’s get you off your feet and back in the green.