For payroll, rent, and other qualified uses*
Who is Eligible for the New Paycheck Protection Program Loans?
The new Paycheck Protection Program has stricter regulations to help more aid get to smaller businesses. You may qualify for the second round of PPP loans if your business:
- Has fewer than 300 employees (including sole proprietorships and independent contractors)
- Experienced a 25% drop in revenue for at least one 2020 quarter, compared year-over-year
- Is not publicly traded
- Has used all funds from a previous PPP loan OR has not previously applied for a PPP loan
What If I Don’t Qualify For the New PPP Loans?
If your business has more than 300 employees or did not experience the required 25% drop in revenue, you may be wondering if there is other funding available for your business. The short answer is yes, you may qualify for a business loan or other financing. A working capital loan, line of credit or equipment loan might be what your business needs to operate or even grow through the pandemic.
How are Paycheck Protection Program Loan Amounts Calculated?
PPP loan amounts will be calculated in the same way as the original Paycheck Protection Program: 2.5 times your business’s monthly payroll costs with a maximum of $2,000,000.*
Payroll costs include compensation and other related costs like retirement payments, state and local taxes on payroll, payment for vacation or paid leave, group healthcare costs, and allowances for separation or dismissal.
How Can I Use PPP Loan Funds?
PPP loans are designed to help small businesses and private nonprofits maintain payrolls and related payments. Therefore, 60% of the loan must be used for qualified expenses:
- Compensation in the form of salaries, wages, commissions or similar compensation, cash tip payments or equivalents
- Healthcare costs and any expenses related to the continuation of group healthcare benefits (including insurance premiums)
- Additional group benefits including life, disability, vision, or dental insurance
- Rent, utilities, and mortgage interest payments (not including payments on the mortgage principal)
- Payments for business software or cloud computing services that help your business operate
- Property damage caused by vandalism or looting due to public disturbances in 2020
- Supplier costs that are essential to the business
- Expenses for worker protections that are in line with CDC, HHS or OSHA recommendations, such as hand sanitizer, sneeze guards and air filtration systems
- Interest on any other debt obligations incurred before February 15, 2020
The remaining 40% of the loan may be used on qualifying non-payroll expenses, including:
This list of qualifying non-payroll expenses has been expanded to accommodate for unique expenses incurred by businesses operating during the pandemic. This expanded list of qualifying expenses applies to all PPP loans except for those already forgiven.
How Do You Calculate PPP Loan Forgiveness Amount?
No more than 40% of the forgiven amount can be used for non-payroll costs like mortgage interest, rent, and utilities. If your business has laid off employees, that will also affect how much your loan can be forgiven.
To receive loan forgiveness, a borrower must apply to their lender with documents verifying payments and payroll details (number of employees, pay rates including IRS payroll tax filings and state income, payroll, and unemployment insurance filings). These documents must be certified from a representative of the business that the information is true.
When Do Paycheck Protection Program Loan Payments Start?
PPP loan payments that are not forgiven are deferred for the first 6 months. Payments can be deferred up to 12 months for borrowers who qualify.
Can You Get a PPP Loan If You Have Other Existing Loans?
Yes. You can qualify for a PPP loan even if you already have existing financing (including other SBA loans). That said, you cannot use the funds from PPP loans and other loans for the same use, at the same time. For example, if you use a disaster loan (EIDL or loan advance) to pay your business’s rent in a given month, you cannot also apply for a PPP loan to cover that month’s rent.
Can You Get a Second PPP Loan?
Yes, as long as you meet the new criteria and have used your previous PPP loan funds. When the Paycheck Protection Program closed in August, many small businesses were still looking for funding help, but had already taken “their share” of the initial PPP offering. Now, smaller businesses can qualify for a second PPP loan, which will provide much-needed aid to struggling business owners.
Do You Have to Prove Economic Injury for PPP Loans?
With the new qualifying standards for the Paycheck Protection Program, business owners do need to prove that their business has experienced a 25% revenue drop for at least one quarter in 2020 compared to the same quarter in 2019. This “drop in revenue” is calculated based on gross receipts before expenses (aka, every dime your business made during the quarter in question).
Important Note: If you were not in business during the second or third quarter of 2019, you can compare any 2020 quarter to the fourth quarter of 2019. If you were not in business at all in 2019, you can compare the second, third or fourth quarter of 2020 to the first quarter in 2020. You need to have been in business by February 15, 2020 to qualify for any PPP loan.
Can you take employee retention credit and PPP loan?
No. According to the IRS, an employer cannot receive a PPP loan and claim Employee Retention Credit. Therefore, recipients of the Employee Retention Credit may not be eligible for the second round of PPP loans.
Talk to a Credibly Lending Partner about alternate loan options today.
How Do I Apply for the New PPP Loans?
A number of banks, credit unions and other lenders will be issuing PPP loans through the new program, but lenders who offered loans during the first round of funding may not be offering loans again. Credibly is partnering with a lender to provide PPP loans to small businesses.
Connect with a Credibly lending partner to learn more about your PPP loan options.
Subject to approval.
*Loan forgiveness is subject to providing follow-up supporting documentation for use of funds. At least 75% must be used for payroll during 8 week period after funding.