How PPP Loans Can Help Small Business Owners

The COVID-19 pandemic has brought about a harsh economic climate – one that has wiped out over a third of businesses in the U.S. over the past year. From lockdowns to limited store capacity to customers with tight budgets, businesses – especially SMEs – have been struggling. To help mitigate the economic impact of the pandemic, the Federal Government has introduced the Paycheck Protection Program (PPP).

If you haven’t yet heard about the PPP loan program, read on to find out all you need to know about it and how to access it now.

What Is a PPP Loan?

As the name suggests, the Paycheck Protection Program (PPP) is geared towards securing the paychecks of American workers. The Federal Government is using it to incentivize businesses to continue to make full payroll.

With the program, businesses can access funds to cover their payroll costs for up to eight weeks. Businesses can also get funds to cover recurrent costs, costs from damages and accidents not covered under insurance.

The loan provides up to 2.5 times the payroll cost of a business, and the maximum amount you can get is $10 million at a fixed interest rate of 1 percent. However, only businesses that were in operation before February15, 2020 are eligible to apply.

The program is open to small businesses, sole proprietors, independent contractors, and those who are self-employed. However, priority is given to small businesses with 20 employees or less – those with a much smaller revenue stream that are the most vulnerable.

Recently, President Biden lowered the bar to qualify by removing restrictions against business owners with federal student loan debt or non-fraud felony convictions.

Second Draw PPP Loans

Businesses who qualified for a first-draw PPP loan can reapply for a second one to cover the following:

• Payroll costs
• Rent
• Interest on other loans, and utilities.
• Worker protection costs related to COVID-19
• Property damage costs caused by looting or vandalism in 2020

The requirements for the second are roughly the same as the first. To qualify for a second draw PPP loan, you must:

• Have received your First Draw PPP loan and have used or will use the released funds only for authorized purposes.
• Have no more than 300 employees
• Show proof of at least a 25 percent decline in gross revenues between comparable quarters in 2019 and 2020

If you qualify, you can receive up to 2.5 times the average monthly cost of payroll up to a maximum of $2 million. Businesses in essential industries like accommodation and food services can access up to 3.5 times their average monthly payroll costs up to a maximum of $2 million.

How To Apply For a PPP Loan

The process of applying and receiving a PPP loan is the same for both the first and second draw. If you applied for the first-draw, you can apply for a second-draw loan through the same lender. If you’re applying for the first time, you can be matched via Lender Match and will receive the same terms regardless of who you borrow from.

There are no fees for applying, but you only have until May 31, 2021 to do so.

Get More Info About PPP Loans

You can learn more about how to leverage PPP loans to keep your business running and retain valuable employees. For more information and to get started, visit the U.S. Small Business Administrations PPP website.