The skinny on the second round of Payroll Protection Plan loans
The new $900 billion economic COVID-19 relief and stimulus package that President Donald Trump signed into law last Sunday includes another $284 billion in loans for small businesses in need.
The U.S. Department of Treasury and Small Business Administration SBA, who oversaw the initial program that launched last March was riddled with loopholes and liabilities. As a result, there were lots of issues raised throughout an already confusing application process.
The new act, called the “Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues,” clears up many of the loan process issues and incorporates new rules for the application process. The SBA has until mid-January to implement the new rules, so if you plan to apply, you should reach out to your banker for assistance.
With the new application you have between eight and 24 weeks to use the funds. At least 60% must be used for payroll while the remaining 40% can be used toward eligible expenses. The new bill has expanded the list of eligible expenses, so now it not only includes things like rent and utilities, but also things like software for remote working and equipment for government-mandate COVID-19 sanitation procedures.
The first round of loans was available for amounts equaling 2.5 times the average monthly payroll for businesses with up to 500 employees, up to $10M. These new loans cap at $2M for businesses with no more than 300 employees. And companies must prove that they experienced a least a 25% loss in revenue in the fourth quarter of 2019 compared to the fourth quarter of 2020.
If you were awarded a loan during the first round of loans, you’re still eligible to apply for this round as long as you meet the requirements mentioned above. New loan applications must be submitted by March 31, 2021.