Tuesday, December 29, 2020 / by Vanessa Saunders
PPP Phase II - Forgivable Loans for small business are back again.
By Vanessa Saunders, MBA, MIMC , Broker Owner, Global Property Systems Real Estate.
The latest federal financial drama is over, as out-going president Trump has reversed his earlier position and has signed the latest Covid-19 relief package. Among the many layers in the larger spending package is rental assistance, eviction protections and direct payments to American citizens. Significantly for small and mid-sized businesses is the second phase of the Paycheck Protection Program, which is rolling out with similar but slightly tighter requirements for applicants.
Basically, applicants need to show that their revenue dropped at least 25 percent year-over-year in the fourth quarter of 2020. While many sectors of American business have responded well to the first PPP round, some industries such as hospitality have continued to languish. Also, the new bill also restricts PPP money to companies with 300 or fewer employees. That’s opposed to the 500-person cap that existed during the first round.
The new bill does not make any changes to the independent contractor parts of the PPP. That means if agents qualified before and now meet the requirements mentioned above, their contractor statues shouldn’t get in the way of them collecting cash from the program.
Who can apply for the new PPP loans?
Businesses can reapply for a second loan even if they already received cash during round one. The new legislation specifically refers to this round of loans as “second draw,” which is what it sounds like: a second chance to draw out money.
How much can you get?
As was the case last time, applicants can receive up to 2.5 times their monthly payroll. There are some exceptions — hospitality businesses can now get more, and enterprises such as concert venues have to use a different program
What about forgiveness?
The new bill actually simplifies the forgiveness process for smaller loans. Borrowers hoping for forgiveness now just have to submit a one-page document. (Although the U.S. Small Business Administration still has to create the form for this process., The bill itself says the document will need to include a description of the “number of employees the eligible recipient was able to retain because of the covered loan,” as well as how much of the covered loan went toward payroll costs. In other words, businesses are being asked to self-certify that their PPP loans helped them pay employees.
This new streamlined process also applies to existing loans, so businesses that previously collected $150,000 or less will now only have to submit a single page to ask for forgiveness.
The program is designed to help businesses keep their employees, and to that end loans are once again forgivable if 60 percent of the cash goes toward payroll. And like the last round, the remainder of the money can go toward things like rent and utilities.
This round also allows borrowers to use their PPP money for things like business software, product and service deliveries, and safety equipment such as ventilators and sneeze guards.
Anyone hoping to get money has until March 31 to apply. As was the case last time, banks and other local lenders are the ones processing applications.
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