Still have questions about Payment Protection Program (PPP) Loans? Did you realize that the deadline for Round 2 applications is almost here? Not sure if PPP Loans even apply to your business? Read this short primer about the PPP that we prepared to assist our busy members at Hone.
UPDATE: Since we originally posted this article, the PPP application deadline was extended from March 31, 2021 to May 31, 2021.
1) You Need to ACT NOW
Paycheck Protection Program (PPP) Loans are being offered until May 31, 2021, only eight weeks from the time we’re writing this. If you are considering a PPP Loan, we encourage you to get your process started immediately.
2) Your Business Probably Qualifies
Here are the qualifications for eligibility for a PPP Loan:
- Your business was operational before February 15, 2020.
- Your business is still open and operational.
- You have no more than 500 employees per location.
These are the three main qualifiers for a loan, but be aware that there may be a few additional requirements or restrictions based on your entity type. This article on bench.co breaks down all the program requirement details in an easily digestible manner if you wish to review before contacting a lender.
3) The Terms Are Pretty Great
The goal of the program is to provide relief while incentivizing small business to keep workers on payroll and rehire laid-off workers. Due to the nature of the program, the terms are extremely favorable for businesses. Let’s look at a few details of the PPP Loan:
- The interest rate for all PPP loans is set at only 1%.
- No personal guarantee or collateral is required.
- No charges are allowed for processing the loans.
- As long as businesses spend their loan money correctly, the full amount can be forgiven….Wait, what?
4) Loan Forgiveness
That’s right, the loan can be forgiven. If you follow these rules you are eligible for PPP Loan Forgiveness:
- 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.
The process has even been streamlined down to a one-page application for forgiveness on loans under $150K. Make sure to discuss PPP Loan Forgiveness when talking with your lender.
5) Second Draw PPP Loans Are Available
For those businesses who already took out a PPP Loan, you may be eligible for a second loan. On top of the original qualifications, you must also show a 25% or greater reduction in revenue from 2019 to 2020. The parameters for eligibility allow you to use gross revenue numbers from either the entire year, or a specific quarter as comparison. You read that correctly; you can use any quarter for comparison. A 25% or greater loss of gross revenue in a specific quarter in 2020, compared to that quarter in 2019, qualifies your business for a Second Draw PPP Loan.
Seriously though, you need to act now.
Obviously, there is more nuance to the entire process, and you should review all of this with your lender when applying for a loan. The bottom line is, if your business has been hurt at all over the past year, you should consider taking advantage of this program while it is available. Here are two quick links to the U.S. Small Business Administration website to help you get started today: