Many businesses have been feeling the weight of the COVID crisis and are in need of financial relief to keep their business afloat. The US Small Business Administration (SBA) and Treasury Department has now opened their doors and is extending support to businesses in need through the Paycheck Protection Program (PPP).
Created by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, this government funding program aims to help large and small businesses, employees, independent contractors and self-employed professionals by providing loans and grants to them.
It seeks to cushion the financial blow of the crisis on businesses and individuals while keeping the economy running by mitigating losses incurred by business owners and professionals. The program also helps employees keep their jobs at the same pay scale.
The first round also called the first draft had a sanction amount of $522 billion and it was used up in just a few months due to the large number of applicants that were granted loans.
The Paycheck Protection Program (PPP) now allows certain eligible borrowers that previously received a PPP loan to apply for a Second Draw PPP Loan with the same general loan terms as their First Draw PPP Loan.
Second Draw PPP Loans can be used to help fund payroll costs, including benefits. Funds can also be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations.
What are its features and advantages?
These loans are 100% guaranteed by the government. Therefore no personal guarantees are required. You also do not need to provide collateral and the interest rate for ALL loans is just 1%, maturing in 5 years.
What businesses are qualified to apply?
First draw loans were generally limited to businesses with a maximum of 500 employees.
For second draw loans, only businesses with no more than 300 employees can apply. They must provide proof of at least a 25% reduction in gross revenue between one year-on-year comparable quarter (2019 and 2020).
How much can you borrow?
You can borrow a maximum of $10 million if you’re a first time PPP borrower and $2 million if it’s your second time.
What are the requirements?
The same basic documentary requirements as the first round are needed. A borrower must also submit annual tax forms showing a reduction in annual revenue of 25% or more in 2020 compared to 2019.
Where can you apply?
Through SBA-approved and guaranteed lenders like banks and other financial institutions. Just fill up an application form and submit the required documents. The entire application process takes just a few minutes. Check with your current bank if they process PPP loans for expediency.
I also suggest you apply with the same bank through which you received your first PPP loan if you have borrowed before as they already have your information and approval on file. Other conduits are Lendio.com, Paypal, or any small community bank. Small Business Administration SBA is currently accepting Second Draw PPP loan applications from participating lenders. They launched a special tool called Lender Match which helps you to effortlessly connect you with a lender and apply on their site https://www.sba.gov/funding-programs/loans/lender-match.
The even better news is that these loans can be forgiven or turned into grants if the funds are utilized for approved expenditures during the covered period. So hurry, avail of this loan program, and protect your business financial stability now.
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