The Small Business Administration (SBA) updated the Paycheck Protection Program (PPP) to benefit small businesses. Borrowers can apply for the Paycheck Protection Program by downloading the First Draw PPP loan application or Second Draw PPP loan application and working with a participating PPP lender through the SBA Lender Match tool. Remember that the application deadline has been extended to May 31, 2021.
SBA PPP Business Loan Requirements Update
The SBA also updated requirements for receiving a PPP loan. These changes were implemented in an effort to further promote relief for smaller businesses hit by the pandemic. Changes to the program include the following:
- Allowing PPP loans to sole proprietors, independent contractors, and self-employed individuals.
- Eliminating the restriction on PPP access for small business owners with prior non-fraud felony convictions.
- Eliminating student loan debt delinquency as a disqualifier for participating in PPP.
- Allowing proprietors to use an Individual Taxpayer Identification Number (ITIN) to apply, enabling access for non-citizen small business owners who are lawful U.S. residents.
First Draw Loan Details
The First Draw PPP is a loan designed to provide a direct incentive for small businesses to keep their workers on payroll. First Draw PPP loans can be used to help fund payroll costs, including benefits, and may also be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations.
SBA will forgive loans if all employee retention criteria are met, and the funds are used for eligible expenses.
- PPP loans have an interest rate of 1%.
- Loans issued prior to June 5, 2020, have a maturity of two years. Loans issued after June 5, 2020, have a maturity of five years.
- Loan payments will be deferred for borrowers who apply for loan forgiveness until SBA remits the borrower’s loan forgiveness amount to the lender. If a borrower does not apply for loan forgiveness, payments are deferred 10 months after the end of the covered period for the borrower’s loan forgiveness (between 8 and 24 weeks).
- No collateral or personal guarantees are required.
- Neither the government nor lenders will charge small businesses any fees.
The following entities affected by COVID-19 may be eligible:
- Sole proprietors, independent contractors, and self-employed persons
- Any small business concern that meets SBA’s size standards (either the industry size standard or the alternative size standard)
- Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:
- 500 employees, or
- That meets the SBA industry size standard if more than 500
- Any business with a NAICS code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location.
If you wish to begin preparing your application, download the following First Draw PPP borrower application form to see the information that will be requested from you when you apply with a lender:
- PPP First Draw Borrower Application Form
- First Draw Borrower Application Form for Schedule C Filers Using Gross Income
Second Draw Loan Details
PPP now allows certain eligible borrowers that previously received a PPP loan to apply for a Second Draw PPP loan with the same general loan terms as their First Draw PPP loan.
Second Draw PPP loans can be used to help fund payroll costs, including benefits. Funds can also be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations.
For most borrowers, the maximum loan amount of a Second Draw PPP loan is 2.5 times the average monthly 2019 or 2020 payroll costs up to $2 million.
A borrower is generally eligible for a Second Draw PPP loan if the borrower:
- Previously received a First Draw PPP loan and will or has used the full amount only for authorized uses;
- Has no more than 300 employees; and
- Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.
Lender Match can help connect you with a lender.
If you wish to begin preparing your application, you can download the following PPP borrower application form to see the information that will be requested from you when you apply with a lender:
- Sample PPP Second Draw Borrower Application Form
- Second Draw Borrower Application Form for Schedule C Filers Using Gross Income
The PPP deadline has been extended again until May 31, 2021 and the SBA has updated the requirements for receiving a PPP loan. You will need to find a lender to work with. Act quickly as money available for this program may run out. Please contact one of our professionals for more information if you have questions.
Meet the Author
Michael specializes in meeting the tax compliance, projection, and planning needs of businesses, entrepreneurs, and business owners. He is Tax Partner in PW Associates, a firm that provides CFO and outsourced tax and accounting services. Michael has regional and small CPA firm experience and ran a sole practitioner tax practice for over 25 years.
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