The U.S. Treasury and Small Business Administration have said they will soon open the program to all small businesses. Although there is no exact date yet, the Consumer Bankers Association said it will happen sometime during the week of January 18th.
The latest Covid assistance package signed at the end of December included $ 284 billion for additional loans to eligible businesses, including those that had already received a loan months ago.
Here are six ways the program has changed for this final round:
Businesses can now get a second PPP loan. Businesses that received a PPP loan when the program now went into effect can apply for a second lottery, as long as they are not a public enterprise, do not employ more than 300 people, use or will fully use first PPP loan for authorized uses, and may show at least a 25% decrease in gross receipts in the first, second or third quarter of this year, compared to the same quarter in 2019.
Targeted funds are made available to the most vulnerable businesses. Specific amounts – ranging from $ 15 billion to $ 25 billion – are earmarked for community development financial institutions – typically lent to minority businesses in inferior communities – and for businesses with less than ten employees, as well as those with low-income areas.
Restaurants can get bigger loans. Most eligible businesses can get a loan equal to 2.5 times their average monthly wage expenses, just like before. But restaurants and lodging companies can now apply for loans equal to 3.5 times a month.
However, no loan may exceed $ 2 million, lower than the previous limit of $ 10 million.
There is greater flexibility in using the loan and still being fully forgiven. In order to fully forgive any PPP loan, at least 60% of the money must be used for wage expenses. But the remaining 40% or less can be used to cover an even wider amount of business expenses than was the case during the first round of PPP lending.
In addition to mortgage interest, rent and utilities, the loan can now be used to cover the cost of personal protective equipment and other expenses incurred to meet Covid restrictions, as well as certain operations, property damage and supplier costs.
The forgiveness process is simpler. To obtain a PPP loan, companies that have borrowed $ 150,000 or less simply submit a one-page certification containing the number of employees the company has retained as a result of the loan, an estimate of how much of the loan was. spent on payroll and the total loan amount. Borrowers must also testify that the information is accurate and that it meets the loan requirements.
This should help many small businesses that have obtained PPP loans during earlier loans. According to the Small Business Administration, a full 87% of loans were under $ 150,000.
The tax cut for PPP loan recipients has only gotten bigger. Although the loans will be tax-free for recipients if used for authorized purposes, the latest Covid lighting package has further sweetened the pot.
Businesses usually deduct their payment and operating expenses from their gross income. Even if this tax-free loan is largely paid off, it will still be deductible.