Common questions about the new PPP Loan
How does the new PPP Loan differ from the first?
The new PPP loan differs from the first loan in different ways listed below:
Time window: The time frame for this new PPP loan is more flexible and allows you to spend the disbursed funds while still maintaining eligibility for your loans to be forgiven. You can choose any end date that falls between 8-24 weeks.
Maximum loan: The new PPP loan has reduced the amount from the initial $10 million to $2 million. The formula for calculating the loan amount for accommodation and food-based services has increased to 3.5 times the average payroll.
Employee tax credit retention: Unlike the first PPP loan, where businesses were not allowed to claim a retention tax credit on employees, the new PPP loan will enable businesses to receive the loan to claim the 2020 tax credit.
Wider loan distribution: Unlike the first PPP loan where the minority, small and women-owned businesses were not considered, the new PPP loan has set aside a part of the total loan to these businesses through community development, financial institutions, credit unions, and community banks.
When can I apply for the New PPP Loan?
You can begin your application for the new PPP loan on January 11th, 2021. Credit unions and community banks will start receiving applications from that date. However, businesses that may choose to apply with larger lending institutions and banks may have to wait a while. As of the time of this write-up, no date has been set for submitting those applications.
When is the deadline for applying?
The application deadline for the new PPP loan is March 31st. However, it is advisable to apply sooner because you may be out of luck once the $284 billion runs out. Many businesses were left out in the first phase of the PPP loan, although there was more funding afterward but late applications were avoided.
Can I apply again if I already have a loan?
Yes, you can apply again even if you have a loan, but you have to meet the PPP loan requirement to qualify. During the first phase of PPP loans, you only had to certify economic uncertainty for your business to be eligible. In this new phase, you have to show that your business experienced a 25% drop in revenue between any quarters from 2019 to 2020. Another PPP loan requirement is that your employees’ headcount should be below 300.
Does the PPP loan have to be used for payroll?
The PPP loan’s primary purpose is to assist business owners in retaining their employees and cover other important business costs. So you have to utilize a minimum of 60% of your funds for payroll costs. You can use the remaining 40% for non-payroll expenses. If you fail to use your PPP loans for payroll purposes, your loan may end up not being forgiven, which means that you have to repay the loan.
Are freelancers eligible for the PPP Loan?
Self-employed individuals, sole proprietors, and other independent contractors are eligible to apply for the new PPP loans. However, you must meet certain PPP loan requirements for self-employed before you qualify for the new PPP loan. You have to be a resident in the United States, and your freelance jobs must have generated income for you. Your self-employed business should have been operational before February 15th of the year in view. You also have to fill out the Schedule C form 1040, and show that the pandemic has affected your business.
What are the requirements for PPP Loan Forgiveness?
You may be eligible for PPP loan forgiveness if you utilize the funds for payroll costs, utilities, or mortgage payments for your business. Another requirement is that you must have used the funds for such purposes within the eight or twenty-fourth week after receiving the funds. You can apply for loan forgiveness after using all the proceeds of the loan you want to be forgiven, although you can apply anytime until the loan matures. If you do not apply for loan forgiveness within ten months after the last maturity date, then you can no longer defer your PPP loan payments. You immediately have to start repaying your loan to your PPP lender.
Can I apply for the PPP 2nd Draw Loan Online?
You can apply for the PPP 2nd draw loan online. The online application can be carried out within minutes while you wait for the processing of your information. It’s a DIY process that you can do if you have the relevant information to provide, and documents to upload.
You can apply online through the following Fintech Companies:
- Funding Circle
Where to Apply for the new PPP loan
The extension to the new PPP is done to avoid issues where intelligible applicants won’t receive their funding. Applications are currently being made using community lenders that can give priority to small businesses. You should check with the lending institution of your choice to find out if they have started accepting applications or when they intend to start.
If the lender you prefer is not among the participating institutions, you can check out other Fintech institutions that are in partnership with local lenders and also receiving applications. Each of these institutions has its own advantages and disadvantages so it is best for you to be sure that the lender will process your application quickly in favor of your business.