The US Treasury and the Small Business Administration have said they will open the program for all small businesses soon. Although there is no exact date yet, the Association of Consumer Banks said it expects it to happen sometime in the week of January 18th.
The most recent Covid aid package signed into law at the end of December included $ 284 billion in additional loans to eligible companies, including those that had already received a loan a few months ago.
Here are six ways the schedule has changed for this last round:
Businesses can now receive a second PPP loan. Companies that received a PPP loan when the program went into effect can now apply for a “second draw,” as long as they are not a public company, do not employ more than 300 people, have used or will use fully the first PPP credit for authorized uses and may show a decrease of at least 25% in gross receipts in the first, second or third quarter of this year compared to the same quarter in 2019.
The targeted funds are made available to the most vulnerable companies. Specific amounts – ranging from $ 15 billion to $ 25 billion – are allocated to community development financial institutions – which typically lend to minority-owned enterprises in disadvantaged communities – and enterprises with less than 10 employees, as well as those with low-income areas.
Restaurants can receive larger loans. Most eligible companies can get a loan equal to 2.5 times their average monthly salary expenses, as before. But restaurants and accommodation companies can now apply for loans equal to 3.5 times their monthly salary.
However, no loan can exceed $ 2 million, down from the previous $ 10 million ceiling.
There is more flexibility in how the loan can be used and yet fully forgiven. For any PPP loan to be fully forgiven, at least 60% of the money must be used for salary expenses. But the remaining 40% or less can be used to cover an even wider portion of business expenses than was the case in the first rounds of the PPP loan.
In addition to mortgage interest, rent and utility payments, the loan can now be used to cover the costs of personal protective equipment and other expenses incurred to comply with Covid’s restrictions, as well as certain operations, property damage and supplier costs.
The process of forgiveness is simpler. To be forgiven a PPP loan, companies that have borrowed $ 150,000 or less will simply need to submit a one-page certification that includes the number of employees retained by the business as a result of the loan, an estimate of how much it was loan spent on salary and the total amount of the loan. Borrowers must also certify that the information is accurate and that they have complied with the loan requirements.
This should help many small businesses that received PPP loans during previous loan rounds. In all, 87 percent of loans were under $ 150,000, according to the Small Business Administration.
The tax cut for PPP loan recipients has just increased. While loans will be tax-exempt for beneficiaries if used for authorized purposes, the latest Covid exemption package subsequently sweetened the vessel.
Businesses normally deduct their gross income and operating expenses from their gross income. Now, even if these expenses were largely paid for through the tax-free loan, they will still be deductible.