Small businesses still have until August 8 to apply for potentially forgivable loans via the initial Paycheck Protection Program (PPP), which was extended from its original June 30 deadline. While the Continuing Small Business Recovery and Paycheck Protection Program Act, part of the HEALS Act in the Senate, does create another round of loan funding, it’s more restrictive and the available amounts are smaller. Although the law’s adoption is not certain, it does set the minimum provisions around the negotiations in Congress for a second PPP.
The loans may be forgivable if at least 60% of proceeds go toward payroll costs. Since the lending window opened on April 3, businesses have borrowed some $519 billion, accounting for more than 5 million loans, according to July 24 data from the Small Business Administration.
The appeal of the program is that the loans are forgivable if borrowers spend at least 60% of the proceeds on payroll costs. Those who fall short may be eligible for partial forgiveness.
With Covid-19 cases on the rise and many small businesses facing the prospect of additional closures after they’ve run out of their first round of PPP funding, a second bite of the apple could keep them afloat.
For instance, they can’t have more than 300 employees and they must demonstrate at least a 50% reduction in gross receipts in the first or second quarter of this year compared to last year.
Generally, borrowers may receive a loan of up to 2.5 times their average total monthly payroll costs in the year prior to the loan, up to $2 million. Those who take a second draw of PPP funds are also eligible for loan forgiveness for expenditures incurred before Jan. 1, 2021. Borrowers must still commit at least 60% of the money toward payroll expenses in order to get full forgiveness. There are also earmarks for second-round funding for the smallest businesses: $25 billion for firms with no more than 10 employees.
You can learn more about the PPP or apply for loans by the end of this week at this Small Business Administration website link. The business attorneys at Bashore Green are also available to answer any questions you may have.