Paycheck Protection Program (PPP) Loan

A Paycheck Protection Program (PPP) Loan is a special kind of loan that helps small businesses and self-employed individuals who were affected by COVID-19. It’s run by the Small Business Administration (SBA), a government agency.

PPP loan

If you qualify, you can get money to help pay your employees or cover business expenses. To qualify, your business must be small enough to meet the program’s size requirements.

What is a PPP Loan for

Paycheck Protection Program (PPP) loans help small businesses keep their employees working. If you use the loan money for certain expenses like:
  • Paying employees
  • Rent or mortgage
  • Utilities
  • Protecting workers
  • Supplies
  • Business operations
  • Fixing property damage
then you might not have to pay back the loan! This is called “loan forgiveness”. It’s like a reward for keeping your employees working

Who Can Get a New PPP Loan?

More people can now get their first loans. If you were running a business by February 15, 2020, you can apply. Even news organizations with fewer than 500 employees per place can apply. Some nonprofit groups and tourism organizations can also apply if they follow certain rules about lobbying and size.

Individual business owners, freelancers, and side-job workers can also apply. The latest round of PPP loans has some new rules:

  •  Publicly trading companies are not eligible.
  • Some money is set aside to help specific groups that are struggling, like:
    • Live music and theatre venues, museums, and movie theatres have lost a lot of business.
    • Small businesses in low-income areas.
    • Very small businesses with 10 or fewer employees.
  • Some businesses that were previously not allowed to apply, like those with owners who have defaulted on student loans or have certain criminal records, are now eligible.
Note: These changes were announced on February 22, 2021.

Who can get a second PPP loan?

The new rules allow businesses to get a second PPP loan if they:
  • Have 300 or fewer employees
  • Can show that their sales decreased by 25% or more in any quarter of 2020 compared to the same quarter in 2019
This means that businesses that already have a PPP loan can apply for another one if they meet these conditions.

How much money does the loan offer?

Here are the rules for PPP loans:
  • First-time loans: maximum of $10 million, based on 2.5 times average monthly payroll costs.
  • Second PPP loans: maximum of $2 million, usually based on 2.5 times average monthly payroll costs, but up to 3.5 times for businesses in the food and accommodation industries.
For self-employed professionals, the loan calculation formula was changed on February 22, 2021, to use gross income instead of net profit. However, this change only applies to new applications received on or after March 5, 2021. People who have loans before March 5 are stuck with the original, often smaller, loan amount and can’t change it.

How to Apply for a PPP Loan

To get a PPP loan, business owners need to:
  • Fill out the right application form (SBA Form 2483 for first-time loans or SBA Form 2483-SD for second-time loans)
  • Gather all necessary documents
  • Apply through a participating lender (like a bank or online lender)
If you already have a relationship with a bank that offers PPP loans, apply there first, as they may prioritize existing customers. The deadline to apply is March 31, 2021. Some online lenders, like Bluevine, offer a faster and more streamlined application process and may be able to provide funding more quickly than traditional banks.

Frequently Asked Questions

What are the rates and terms of the loan?

The PPP loans have some great benefits:
  • Low-interest rate: 1% fixed rate, which is very reasonable
  • No collateral required: You don’t have to put up any assets to secure the loan
  • No application fees: You won’t have to pay any extra fees to apply for the loan
These terms make PPP loans a very attractive option for businesses that need financial help.

How does PPP loan forgiveness work?

The new PPP rules make it easier for people who have less than $150,000 to get their loans forgiven. If you used the loan money for certain things like paying employees, rent, utilities, or mortgage interest during 8 to 24 weeks after getting the loan, you won’t have to pay that part of the loan back.

However, to get full forgiveness, at least 60% of the money must have gone to paying employees, and no more than 40% should go for other costs.

Can I still apply for a PPP loan?

No, The Paycheck Protection Program (PPP) ended on May 31, 2021. Existing borrowers may be eligible for PPP loan forgiveness.

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