As the COVID-19 pandemic shuttered businesses around the country, the Paycheck Protection Program, or PPP, was created through the passage of the CARES Act at the end of March. The aim of the PPP would be to provide struggling businesses with forgivable loans to be used on operational costs, beginning with payroll. Unfortunately, the initial $349 billion in funding authorized for the program was exhausted in just under fourteen days due to overwhelming demand. When another $310 billion in funding for PPP loans was passed on April 24, it had been feared that this second round of funding could be depleted just as quickly as was the very first round.
However, inside a webinar hosted by iHeartRadio on May 21st, the SBA confirmed recent surveys that the PPP program still has over $100 billion in funding left to distribute. In case your business has been suffering from the effects of COVID-19, you can always be capable of getting a PPP loan should you apply soon.
In addition to the above, the SBA released the following clarifications in the May 21 webinar:
- Per the PPP Interim Final Rule, funding is on a first-come, first-serve basis; lenders should not hold or delay applications
- Applications are authorized by the lender, which sends these to the SBA for verification
- If you applied before Phase 2 (before April 27), seek advice from your lender to see if the application went into the SBA’s system
- If you applied in Phase 2 (on or after April 27), confirm your lender has all it needs to submit the application to the SBA
- A lender has up to Ten days after the SBA verifies the PPP loan for that disbursement
- Upon receipt, get a separate banking account to track expenditures for forgiveness
Let’s talk much more about the PPP program and the issues it’s had thus far.
Why Businesses Aren’t Trying to get The PPP
Many businesses have refrained from applying for PPP loans so far. For many businesses, this is because simple: they haven’t needed the funding. Other manufacturers happen to be deterred from applying by uncertainty all around the forgiveness rules — we’ll enter into that in a moment.
Other business people may have a need for additional capital because of the virus but may not be aware that another round of funding for the PPP program was passed. Still others may have been discouraged by widespread reports of problems encountered by anyone who has requested PPP funds. While these complaints have been very real for the businesses affected, over $500 billion in funding continues to be distributed with the PPP thus far. Even accounting for the truth that some of this funding has unfortunately attended healthy and/or politically-connected entities, that’s a significant change in money to PPP loan applicants.
Thankfully, if you apply soon, your company may still receive some of the money that continues to be within the funding pool.
Are Forgiveness Rules Likely to Change?
As I pointed out, uncertainty concerning the conditions through which PPP loans could be forgiven has been a significant deterrent to companies that may otherwise qualify for PPP funds. Additionally, some business owners have feared that they may face penalties or any other legal consequences if an audit through the SBA concludes they didn’t meet the threshold for “needing” the borrowed funds. However, on May 13th, it had been announced that business people with loans under $2 million won't face additional scrutiny through the SBA regarding their requirement for PPP funds and won't face penalties.
However, even when businesses won’t face the potential of penalties for “unnecessarily” getting a PPP loan under $2 million, you'll still need to use the cash as laid out by the SBA’s rules to be able to have your loan forgiven. To that end, bipartisan legislation continues to be proposed that would, if enacted, relax the forgiveness requirements by doing the following:
- Let PPP borrowers make use of the cash on payrolls in excess of the 8 weeks specified under the original program
- Relax essential that 75% from the loans be used for payroll expenses
- Give PPP borrowers more than two years to repay any portion of the loan that doesn’t get forgiven
- Allow businesses receiving PPP loans to get a payroll tax deferment
This legislation — known as The Paycheck Protection Flexibility Act — has not yet been passed, nevertheless its broad support in Congress makes its eventual passage relatively likely.
Should Your online business Apply For The PPP?
Essentially, if your business has suffered because of the coronavirus pandemic and you can use funding to cover payroll along with other business expenses, you should apply for a PPP loan ASAP.
I’m sure it’s discouraging to hear about people getting the runaround after applying for a PPP loan. Many business owners wrote to us about their Kafkaesque difficulties in getting these needed funds. Simply put, the us government has let down countless business people at the worst possible time. Nonetheless, over $500 billion in PPP funding has been distributed to date, and also over $100 billion remains. Apply today, and you’ll have a go at getting a PPP loan.
Learn Much more about The Paycheck Protection Program
If you’re thinking of applying but want to know more about the Paycheck Protection Program, how to apply, and the way to ultimately have your loan forgiven, has numerous PPP-related resources to help you.
- Start with SBA PPP Loans Explained to have an overview of the way the program works, who qualifies, where to use.
- Then, take a look at How To try to get A PPP Loan for info on taking the next step.
- Read our article Your Help guide to PPP Forgiveness Rules for more on how to have your PPP loan forgiven.
