PPP: It's Go Time

The time to apply for the next round of COVID relief is finally here. When can your business apply? Below, we'll break down the timeline plus share info on qualification, forgiveness, and more, so you can get a head start at accessing the funds you need.

SBA Announces Timing for Fund Availability

The U.S. Small Business Administration will re-open the Paycheck Protection Program (PPP) loan portal to PPP-eligible lenders with $1 billion or less in assets for First and Second Draw applications on Friday, January 15, 2021 at 9 am ET. 

The portal will fully open on Tuesday, January 19, 2021 to all participating PPP lenders to submit First and Second Draw loan applications to SBA.

Here’s the latest application form, updated as of 1/8/2021.  

What Does This Mean for You? 

If you meet the requirements and are planning on applying for relief funding under any of the programs outlined in the latest edition of the CARES Act, you need to act now. 

Based on our recent survey over 80% of business owners are looking for additional relief, and getting in at the head of the line is the best way to access funding.  

This legislation created some special carve-outs and programs for businesses meeting certain requirements. Here’s a quick summary of those programs and where you can look for additional information. 

Need more information? Learn more about the PPP programs from the SBA. 

First Draw Loans (Getting Relief for the First Time) 

Whether you didn’t need the money last go-round or had your application rejected, you have the opportunity to apply in this round of funding.  

According to the SBA here’s who can apply:  

“Eligible small entities, that together with their affiliates (if applicable), have 500 or fewer employees—including nonprofits, veterans organizations, tribal concerns, self-employed individuals, sole proprietorships, and independent contractors.” 

Located in a low or moderate income neighborhood? 

At least $15 billion is being set aside for First Draw PPP loans to eligible borrowers with a maximum of 10 employees or for loans of $250,000 or less to eligible borrowers. The SBA is giving certain lending organizations first access (Friday, January 15th vs. Monday January 19th for all lenders).  

If you are located in one of these areas you may want to start off with one of these lenders.  The SBA has defined them as:

“Participating community financial institutions (CFIs), which include Community Development Financial Institutions (CDFIs), Minority Depository Institutions (MDIs), Certified Development Companies (CDCs), and Microloan Intermediaries.”

Tip: Apply with a bank or online service provider you have a relationship with.  Local and regional banks provided better service than majors in last two rounds.  

While all approved lenders are required to provide the same terms for these loans, historically, business owners have found more success working with local and regional banks or online providers rather than the large major money center banks. 

The best place to start is with a banker or online service provider you are already working with. Be aware of scams. There is a lot of money involved with this program, and unscrupulous people are taking advantage of it. 

You can verify a financial institution is legit or find a qualified PPP lender using the SBA Lender Match.

Getting Your Loan Forgiven

First Draw PPP Loans made to eligible borrowers qualify for full loan forgiveness if during the 8- to 24-week covered period following loan disbursement if...

• Employee and compensation levels are maintained;
• The loan proceeds are spent on payroll costs and other eligible expenses; and
• At least 60 percent of the proceeds are spent on payroll costs.

Eligible expenses are defined by the SBA as: 

"Funds 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."

Second Draw Loans (For Businesses Who Received PPP in 2020)

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. 
• 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.

Conditions you need to meet:

• Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses
• Has no more than 300 employees; and
• Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020

How should you apply?

Start with the financial institution you used for your first loan.  If they are unable to meet your needs, you can find another lender using the SBA Lender Match application.  

Loans for Specific Businesses 

In an attempt to level the playing field and get money to businesses in the greatest need, the legislation provides additional guidance and resources for certain businesses. 

Here’s some of the information along with links to official sites where you can learn more about them.

Solopreneurs

The PPP funding IS available to the 81% of small businesses who are solopreneurs, independent contractors, or self-employed. 

The first step in this process is to review your Form 1040 Schedule C for 2019.  Did it show self-employment income? If so, you may be eligible for PPP relief.  

Start by filling out the application to make sure you have all of the information required, and then connecting with an approved local financial institution or online provider.  

What if I am a solo farmer?
If you report income on IRS Form 1040 Schedule F, according to the SBA, self-employed farmers (i.e., those who report their net farm profit on IRS Form 1040 Schedule 1 and Schedule F) should use IRS Form 1040 Schedule F in lieu of Schedule C, and Schedule F line 34 net farm profit should be used to determine their loan amount in place of Schedule C line 31 net profit. 

The calculation is otherwise the same as for Schedule C filers above. The 2019 IRS Form 1040 Schedule 1 and Schedule F must be included with the loan application.

Minority, Underserved, Veteran, and Women-Owned Business

Congress set aside funds for new and smaller borrowers, for borrowers in low- and moderate-income communities, and for community and smaller lenders. These set asides include:

• $15 billion across first and second draw PPP loans for lending by community financial institutions; 
• $15 billion across first and second draw PPP loans for lending by Insured Depository Institutions, Credit Unions, and Farm Credit System Institutions with consolidated assets of less than $10 billion; 
• $35 billion for new first draw PPP borrowers; and 
• $15 billion and $25 billion for first draw and second draw PPP loans, respectively, for borrowers with a maximum of 10 employees or for loans less than $250,000 to borrowers in low-or moderate-income neighborhoods. 
• SBA has determined that at least 25 percent of each of those set-asides will go to each one of the groups: loans to borrowers with a maximum of 10 employees and loans less than $250,000 to borrowers in low-or moderate-income neighborhoods.

Navigating these special carve outs might take a little extra work, but it could be worthwhile if the main funding resources become limited due to the volume of applications.  

In particular if you are interested in pursuing the community financial institution carve out, you might want to start by identifying one of these lenders nearby.  You can search for them here.

Find out more about set asides for women, minority, veteran, and underserved businesses from the SBA.

Accommodation & Food Services Businesses

A special provision was made for businesses assigned to the NAICS code 72 (Accommodation and Food Services) industry allowing these businesses to apply for loans up to 3.5x average monthly payroll costs vs. the 2.5x level for all other businesses covered by the program.  

Shuttered Industries 

A special program was created for shuttered industries (seperate from the PPP program and administered by the SBA, although they have yet to announce a process for applying for the relief).  

This program authorizes $15 billion for SBA to make grants to eligible live venues, independent movie theaters, and other cultural institutions that can demonstrate a revenue loss of 25 percent to address the economic effects of the COVID-19 pandemic. 

The SBA may make an initial grant of up to $10 million dollars to an eligible person or entity and a supplemental grant that is equal to 50 percent of the initial grant. Grants can be used to cover expenses such as payroll costs, rent, utilities, and personal protective equipment. 

Two priority periods are established to ensure the hardest-hit entities have dedicated access to assistance for the first 28 days of the program, while a reserve fund is made available to ensure that entities that are ineligible for the priority periods are able to receive assistance following the two 14-day priority periods. 

A set-aside of $2 billion is also reserved for entities with 50 or fewer employees. Eligible individuals or entities seeking to participate in the shuttered venue grant program should contact the SBA. This is a new program and will take time for the SBA to launch.

Seasonal Businesses

The legislation anticipates certain industries may not have been in full operation during the time allotted for accounting for payroll expenses. They have provided some guidance to lenders on ways they can look to additional periods of time to insure a fair calculation for payroll expenses.  

Here’s a question and answer from the SBA’s guidance on this calculation.  

Question: My small business is a seasonal business whose activity increases from April to June. Considering activity from that period would be a more accurate reflection of my business’s operations. However, my small business was not fully ramped up on February 15, 2020. Am I still eligible? 

Answer: In evaluating a borrower’s eligibility, a lender may consider whether a seasonal borrower was in operation on February 1.

Get Started Now

We’ve tried to capture as much information as possible and synthesize it in a way most useful to you. We by no means claim to be experts in this process and implore you to reach out to your financial advisors, accountants, financial institutions, and resources at your local SBA office for guidance and assistance in this process.  

We hope this information helped you start the process, and we hope above all you are able to access the funding relief you and your business need to ride out this storm. 

 Want to chat with other business owners about the PPP application process? Join the COVID Relief Support Group to continue the conversation.