Disclaimer: This article is updated as of January 22, 2021. That being said, details regarding the PPP are subject to change, so stay tuned for updates either here or on the SBA website.
If your business is struggling after nine months of COVID-19-related shutdowns and challenges, help is on the way. The “Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act,” recently passed by Congress, reauthorizes the Paycheck Protection Program (PPP), which is set to expire in August 2020.
The two primary goals of the new COVID-19 relief bill are to: 1) provide funding to small businesses that were not awarded PPP loans in the first round, and 2) allow some eligible businesses to be considered for a second PPP loan.
The program will remain in effect until March 31, 2021, or until funds run out, whichever comes first, after the SBA reopens it. Small businesses may be able to apply for a loan as early as January 15, 2021.
It’s important to familiarize yourself with the most recent eligibility requirements and terms for a PPP loan so you know where you stand and how to get ready. Before applying for PPP loan funding, make sure you read this guide, which contains all the information you need to know about the updates.
The Paycheck Protection Program (PPP) was a critical lifeline for many small businesses during the COVID-19 pandemic. While the program has officially ended, understanding the eligibility requirements can be helpful for future loan opportunities or other government assistance programs
Who Was Eligible for a PPP Loan?
To be eligible for a PPP loan your business had to meet the following criteria:
- Be a for-profit business, 501(c)(19) veterans organization, or 501(c)(6) tribal business concern.
- Be in operation on February 15, 2020.
- Have less than 500 employees (including full-time, part-time, and independent contractors).
- Have suffered economic uncertainty as a result of the COVID-19 pandemic.
Additional Eligibility Requirements:
- Sole proprietors, independent contractors, and self-employed individuals were also eligible.
- Businesses with multiple locations were eligible if they had no more than 500 employees per location.
- Certain non-profit organizations were also eligible, including 501(c)(3) organizations and 501(c)(19) veterans organizations.
How to Determine Your Eligibility:
Here are some more things to think about if you’re not sure if your company fits the qualifying criteria:
- Industry: The PPP was available to businesses in most industries, with some exceptions.
- Revenue: There were no specific revenue requirements for the PPP, but your business had to demonstrate economic uncertainty due to the pandemic.
- Affiliation: Businesses that were affiliated with other businesses were subject to a combined employee and revenue size limit.
What If I’m Not Sure If I Qualify?
If you’re unsure about your eligibility, it’s best to consult with a financial advisor or accountant. They can help you determine if your business meets the requirements and guide you through the application process.
Additional Resources:
- SBA PPP Loan Eligibility: https://www.sba.gov/funding-programs/loans/covid-19-relief-options/paycheck-protection-program
- Funding Circle PPP Loan Guide: https://www.fundingcircle.com/us/resources/ppp-loans-2021-everything-you-need-to-know/
Disclaimer:
This information is for educational purposes only and should not be considered financial advice. Please consult with a qualified financial professional before making any decisions about your finances.
Expanded Coverage For Loans
Under the original Paycheck Protection Program, business owners who used their loans for mortgage interest payments, utilities, rent, and payroll costs could have some or all of their debts forgiven.
PPP2 loans will cover more expenses than just rent, utilities, payroll, and mortgage interest, which will facilitate partial or complete loan forgiveness. The inclusion of employer-provided group insurance benefits, such as group life, disability, vision, or dental insurance, is another significant adjustment to payroll expenses.
Here are the new areas you can allocate PPP loan funds to:
- Operations Expenditures: Installing or upgrading software, using cloud computing, or meeting other needs related to accounting or human resources
- Costs of Property Damage: Expenses (not reimbursed by insurance) associated with any property damage resulting from public disturbances in 2020
- Supplier costs: Any payments made to a supplier in connection with a contract, purchase order, or purchase order that, at the time of the payment, are necessary for the day-to-day operations of your business
- Worker Protection: Personal protective equipment (PPE) and additional expenses associated with adhering to federal health and safety regulations or state or local COVID-19 guidelines. Examples of PPE include high-efficiency air filters and glass sneeze guards.
Who’s Eligible to Apply For New PPP Loans?
The new round of PPP loans will be available to three categories of businesses:
- Small enterprises that met the requirements but were not awarded a PPP loan in the initial funding round
- Previous PPP loan recipients who fit certain requirements and require a second loan
- Former PPP loan recipients who wish to apply for more funding after repaying all or part of their initial loan
For a business to be eligible for a PPP loan, it must have been operating since at least February 15, 2020.
First-time PPP borrowers from the following groups are eligible to apply:
- Small companies or nonprofits that employ 500 people or less are eligible for additional SBA 7(a) loans.
- Small enterprises that fit the SBA’s size requirements, 501(c)(19) veteran’s organizations, tribal businesses, and small agricultural cooperatives
- Sole proprietors, independent contractors, and self-employed people.
- Businesses providing food services or hospitality (NAICS codes beginning with 72) and employing fewer than 300 people per physical location
Previous PPP loan recipients who meet the following criteria are eligible to apply:
- Have fewer than 300 employees.
- have utilized their first PPP loan in full or intend to do so
- Is it possible to show a 25% decrease in gross revenue from any quarter in 2020 as compared to the same quarter in 2019?
Applicants who previously received a PPP loan and repaid all or part of the loan are also eligible (more on this later)