Small Businesses Can Start Applying For New PPP Loans Today

(CNN) – For millions of small enterprises still struggling to Make ends meet, today is the first day to apply for a new potentially repayable federal loan.

The paycheck protection program reopens Monday. But initially, it will only be available to companies applying to community financial institutions. Those are banks and lenders that finance small businesses in underserved communities, many of whom have struggled to obtain loans in previous rounds of PPP loans or have not applied.

The US Treasury and the Small Business Administration have announced that they will soon be opening the program to all small businesses. While there is no exact date yet, the Consumer Bankers Association has said it expects this to happen during the week of January 18.

The latest Covid relief plan enacted at the end of December included $ 284 billion for additional loans to qualifying businesses, including those that already received a loan months ago.

The package also included measures to make PPP loans more flexible for all small businesses, more useful for those hard hit. Restaurants and more accessible to micro-enterprises than it was during the first two rounds of loans.

Here are six ways the schedule has changed for this final round:

Businesses can now get a second PPP loan. Businesses that got a PPP loan when the program first came into effect can now apply for a ‘second drawdown’, as long as they are not a state-owned enterprise, employ no more than 300 people, have used or fully utilize their first authorized use PPP loan, and may show a decrease of at least 25% in gross revenue in the first, second or third quarters of this year compared to the same quarter in 2019.

Targeted funds are made available to the most vulnerable businesses. Specific amounts – ranging from $ 15 billion to $ 25 billion – are earmarked for community development financial institutions – which typically lend to minority-owned businesses in underserved communities – and businesses with fewer than 10 employees, as well as those in low income areas.

Restaurants can get larger loans. Most qualifying businesses can get a loan equal to 2.5 times their average monthly salary expense, as before. But restaurants and accommodation companies can now apply for loans equal to 3.5 times the monthly payroll.

However, no loan can exceed $ 2 million, down from the previous limit of $ 10 million.

There is more flexibility in how the loan can be used while being canceled entirely. For a PPP loan to be fully canceled, at least 60% of the money must be used for payroll expenses. But the remaining 40% or less can be used to cover an even wider range of business expenses than was the case in early PPP loan cycles.

Beyond mortgage interest, rent, and utility payments, the loan can now be used to cover the costs of personal protective equipment and other expenses incurred to meet Covid restrictions, as well as certain operations, property damage and supplier costs.

The forgiveness process is simpler. To get a PPP loan canceled, businesses that have borrowed $ 150,000 or less will simply need to submit a one-page certificate showing the number of employees the business has retained thanks to the loan, an estimate of the amount. of the loan on the payroll and the total amount of the loan. Borrowers must also certify that the information is correct and that they have complied with the requirements of the loan.

This should help many small businesses who have obtained PPP loans in previous loan cycles. According to the Small Business Administration, 87% of loans were less than $ 150,000.

Tax relief for PPP loan recipients has just increased. While the loans will be tax-free for beneficiaries if used for authorized purposes, the latest Covid relief plan has sweetened the pot even further.

Businesses normally deduct their payroll and operating expenses from their gross income. Now, even though these expenses were largely paid for by the tax-free loan, they will still be deductible.

For more information on the reopening of the program and its modifications, the Treasury Department and the Small Business Administration have issued guidelines here Friday.

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