August 8 is the last day for small businesses to apply for the Paycheck Protection Program, the largest component of small business relief included in the $2 trillion CARES Act. The funding is aimed at helping reduce the widespread impact of the coronavirus pandemic.
Since its launch, Congress amended the PPP law and the Small Business Administration posted many new guidelines. Luckily, there is still money left for those who haven’t yet applied.
With the new deadline to apply for the program approaching, many small businesses have a few questions about applying for forgiveness of the loan. Here are a few answers to the most common concerns.
Remember, this is not official legal advice. If you have questions or concerns about the guidelines of the PPP, it’s best to consult an attorney or financial advisor.
Can I still apply for the PPP loan?
Yes. Some banks already shut down their application portals, but the SBA recently updated the Lender Match tool. The organization describes it as a tool for “pandemic-affected small businesses who have not applied for or received an approved PPP loan to connect with lenders.”
How much money is left?
As of June 20, $130 billion in unallocated funds was left. Unless Congress approves another round, any leftover funding will return to the US Treasury.
Can small businesses who have reopened still apply for the PPP loan?
Yes. You do not have to shut down your business to qualify for the loan.
Have any PPP loan forgiveness rules changed?
Yes. The Paycheck Protection Program Flexibility Act brought the following updates:
- The amount of the loan that you must use on payroll decreased from 75% to 60%. You must use the remaining portion of the loan to pay for rent, utilities, and other expenses related to your business.
- The amount of time you can use the funds while remaining eligible for loan forgiveness increased from 8 to 24 weeks.
- The time you have to pay back non-forgivable PPP loans extended from from 2 to 5 years.
- If former employees won’t come back to work, or if your December 2020 revenue is lower than you February 2020 revenue, your loan can still be forgiven.
- You can now defer payroll taxes.
Are there any easy ways to apply for PPP loan forgiveness?
There are two easier-to-understand applications from which you can choose:
- The “borrower-friendly” application, which you can download here.
- The SBA’s “EZ version.” Business must meet one of the following requirements to use this application”
- You are self-employed or have no employees.
- There were no decreases in employee hours and you did not decrease your employees’ salaries by 25%.
- You experienced a decrease in revenue due to health regulations put in place due to the coronavirus pandemic and you did not reduce wages by more than 25%.
What is the Paycheck Protection Program?
The Paycheck Protection Program is a small business relief program aimed at providing businesses in the U.S. with eight weeks of funding assistance through federally guaranteed loans backed by the Small Business Administration.
The forgivable loans program depends on payroll costs and covers employees earning up to $100,000 per year. You can apply for 2.5 times your cost of payroll, and you can use the funds for payroll and other operational expenses between the timeframe of February 15 and June 30, 2020.
Who is eligible for a Paycheck Protection Program loan?
Businesses with 500 or fewer employees, as well as non-profits, independent contractors, and the self-employed, who have been impacted by COVID-19 are eligible for the loan program.
To show you have experienced a negative impact, there is a section on your Paycheck Protection Program application where you will need to certify that “current economic uncertainty makes the loan request necessary.”
How can my loan be forgiven?
You don’t have to pay the Paycheck Protection Program loan back if you use it to cover payroll costs, mortgage interest, rent, and utility costs. You must also maintain all employees and compensation levels.
You’ll need to submit a request for loan forgiveness from your SBA lender. In the request, be sure to document:
- The number of full-time employees you have
- Pay rates for all employees
- Payments on an eligible mortgage or lease
- Utility payments
Your lender will have 60 days to reply to your request. The forgiveness won’t go into effect until the eight-week period after you receive your loan ends.
Note: Any amount that is not forgiven will be treated as a two-year loan with a 1% fixed interest rate. The government defers all payments (principal, interest and fees) for 6 months; however, the loan will accrue interest over this period.
How do I apply?
You can apply for the Paycheck Protection Program through any lender approved by the SBA. For many businesses, you’ll be able to work with your bank. For businesses whose banks are not processing PPP loans, you’ll need to find another lender. The SBA provides a list of all approved lenders. Homebase has also identified several lenders through which you can submit an application now (and pay no fees for applying).
Remember, this is not official legal advice. If you have questions or concerns about the guidelines of the PPP, consult an attorney.