Distributed through the Small Business Administration (SBA), the Paycheck Protection Program (PPP) provides loans to businesses to help keep the US workforce employed during the coronavirus pandemic. Between April and August of 2020, the US government distributed $523 billion in forgivable government-backed loans through the PPP. That first round helped 5.2 million small businesses stay afloat and keep 51 million Americans employed.
Now the program is back. In December, Congress included $284 billion in new PPP funding in the stimulus package it passed. Perhaps most importantly, the new measures will allow businesses that have been hardest hit by the coronavirus pandemic to apply for yet another loan, and those who missed the first round to apply for an initial loan as well. Here is what to expect from the second round of PPP loans:
- In order to qualify, businesses must have been in operation before Feb. 15, 2020 and must employ less than 500 individuals.
- First time borrowers are eligible for 2.5 times monthly payroll cost, or up to $10 million in loans
- Second time borrowers must demonstrate severe need in order to qualify (more on this below)
In order to qualify for a second loan, a business must meet the following criteria:
- The business must have less than 300 employees on payroll
- Demonstrate at least a 25% reduction in gross receipts between 2019 and 2020
- The maximum amount for a second draw is $2 million
Importantly, business owners have the opportunity to have these loans forgiven by the federal government. The requirements? At least 60% of the loan must be used to pay workers and it must be distributed over a period of 8 and 24 weeks. Additionally, the other 40% of the loan can be used to cover rent, utilities, payments to suppliers, property damage, and any expenses related to COVID-19 compliance.
Lenders were able to begin submitting loan applications to the SBA on Friday, January 15. The SBA website provides a lender match service to help business owners find a suitable lender to meet their needs.
So far, PPP loans have played a crucial role in keeping American businesses afloat and protecting the US economy from sliding further into a COVID-19 induced pandemic. If your business is eligible, a PPP loan may be the perfect solution to help you weather the current pandemic and come through the recession in good shape.
Visa Business Plans is led by Marco Scanu, a certified coach from the University of Miami with a globally-based practice coaching Fortune 1000 company executives, entrepreneurs, as well as professionals in 4 different continents. Mr. Scanu advises clients on turnaround strategies and crisis management.
Mr. Scanu received a bachelor’s degree in Business Administration (Cum Laude) from the University of Florida and an MBA in Management from Bocconi University in Milan, Italy. Mr. Scanu was also a Visiting Scholar at Michigan State University under the prestigious H. Humphrey Fellowship (Fulbright program) with a focus on Entrepreneurship, Venture Capital and high-growth enterprises.
At present, Mr. Scanu is the managing partner and CEO at Visa Business Plans, a Miami-based boutique consulting firm providing attorneys and investors with business planning services in the areas of US and Canadian immigration and SBA loans.