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May 5, 2022: The SBA has stopped accepting PPP applications due to insufficient funds. The SBA will continue to finance outstanding applications which have been already approved.
Explore other loan options with our top lenders or visit the lending marketplace Lendio to get matched with the best offers for the business.
On December 27, 2022, a $900 billion COVID-19 relief package was signed into law as part of the larger omnibus bill funding the us government. This bill includes $284 billion in new funding for the Paycheck Protection Program (PPP), the government loan program established in March 2022 as part of the initial COVID-19 relief package referred to as CARES Act.
While this latest relief package adds the funding essential to restart the PPP loan program, it also adjusts the rules for eligibility as well as for how loan proceeds must be used in order to be eligible for a forgiveness. In the following paragraphs, we’re going to explain the updated eligibility and usage requirements for Paycheck Protection Program loans.
Keep on reading to find out how your business can benefit from the revived Paycheck Protection Program.
PPP Loan Eligibility Requirements
Let’s examine the eligibility requirements a company must meet to be able to be eligible for a a PPP loan.
Business Size
To be eligible for a a first-time PPP loan, your business must have 500 or fewer employees. As you’ll see below, the guidelines will vary if this is your next time receiving a PPP loan.
Previous PPP Loans
If you applied for and received a PPP loan throughout the first round of funding that ended last August, you are still permitted to receive another PPP loan now. However, you will find caveats to this.
To qualify for another PPP loan, you must have used all the funds you received from the first PPP loan. However, you are still eligible to get a second PPP loan in case your first loan has not yet been forgiven or repaid.
Additionally, your company should have 300 or fewer employees to be eligible for a another PPP loan — a more stringent limit which allies to first-time PPP borrowers. However, particular food services businesses with more than 300 employees and multiple locations may still be eligible for a second PPP loan if each location employs 300 or fewer employees.
Another requirement for those getting a second PPP loan: you must be in a position to show that your company has experienced a 25% decline in gross revenue in any 2022 quarter in contrast to exactly the same quarter in 2022.
Furthermore, publicly-traded information mill not eligible to remove a second PPP loan.
Credit Score Requirements
Just just like the first round of funding, there are no credit score requirements you must meet in order to qualify for a PPP loan. Now, apparently , some PPP lenders did consider an applicant’s credit profile for the first round of PPP loans, so depending on the PPP lender to which are applying, your credit score may unfortunately be taken into consideration whenever your application is assessed. However, this isn’t the case with all PPP lenders, and also the truth remains there are no formal credit rating requirements within the PPP program, so even though you have bad credit, I’d encourage you to apply for a PPP loan should you satisfy the other eligibility requirements.
Time In Business
To qualify for a PPP loan, your business should have been in operation prior to February 15, 2022.
Loan Size Limits
The maximum amount of your PPP loan is 2.Five times your average monthly payroll costs in the fiscal or calendar year prior to the time of your loan application, up to and including cap of $2 million (down from $10 million in the previous funding round). However, for hotels and restaurants, the rules are slightly different — your maximum PPP loan amount is 3.5 times your average monthly payroll costs, though your maximum limit continues to be $2 million.
Other Requirements
One new requirement for PPP eligibility is the fact that a company must not have significant operations in the People’s Republic Of China (including Hong Kong) to be eligible for a PPP loan. These days it is unclear exactly how significant these ties should be before a business is disqualified from PPP relief.
What’s more, the brand new PPP funding bill repeals the prior requirement that PPP borrowers deduct the quantity of any Economic Injury Disaster Loan (EIDL) advance using their PPP forgiveness amount.
Unlike other loans, you can curently have a current line of credit open but still entitled to the PPP loans, and you can already have loans with the SBA but still qualify.
The last day you are able to obtain a PPP loan is May 31st, 2022.
First VS Second Draw PPP Loans
We’ve touched on this subject, but let’s evaluate the most critical differences between the third and fourth draw PPP loans. While you could borrow no more than $10 million (depending on your payroll) for that first draw, the limit continues to be lowered to $2 million for that second draw.
Likewise, for any second draw, your company must have experienced a 25% decline in gross revenue in almost any quarter of 2022 in contrast to exactly the same quarter in 2022. This requirement did not exists for the first draw (though you had to show that COVID-19 was hurting your business). Likewise with the new requirement that the business doesn't have significant operations in China (including Hong Kong).
Also, the borrowed funds forgiveness process has been greatly simplified now for all those borrowing $150,000 or less. We’ll discuss PPP loan forgiveness in a moment.
PPP Loan Usage Guidelines
Loan Size
Second draw PPP loans have a $2 million ceiling (observe that first draw PPP loans have a $10 billion dollar ceiling). Businesses will qualify for an amount 2.Five times the average from the last Twelve months of payroll. For example, when the average monthly payroll is $30,000, that small company will qualify for $75,000 in Paycheck Protection loans. These financing options are capped at a 1% interest rate for the life of the loan and have a five-year loan term. (Side note: In case your business hasn’t been operational for a twelve month, the government provides other ways to determine average payroll.)
One exception to this: hotels and restaurants will be eligible for a 3.Five times the quantity of their last 12 months of payroll, though their maximum loan amount continues to be $2 million.
Covered Expenses
PPP loans are designed to cover payroll costs, including salary, wages, retirement contributions, vacation/sick leave/family leave, and group health premiums. There are also provisions to cover rent, mortgage interest, utilities, or any other interest on debts.
Forgivable expenditures happen to be expended to incorporate necessary software and supplier costs, COVID-related worker protection measures such as PPE and plexiglass barriers, and property damage associated with riots and civil unrest.
Coverage Period
Be aware that in order to be eligible for full loan forgiveness, you must spend at least 60% of the funds on payroll over a period of either eight or 24 weeks (your decision). Businesses must take care of and guarantee payroll first for a minimum of eight weeks, then the rest of the money can be allocated to another expenses I pointed out. Forgivable expenditures happen to be expended to include necessary software and supplier costs, COVID-related worker protection measures for example PPE and plexiglass barriers, and property damage associated with riots and civil unrest.
These loans are also extended to independent contractors, gig economy workers, sole proprietors, and tribal businesses. They cover an employee’s salary up to $100,000. Which means that if the employee makes over $100,000, they can receive payment up to that quantity; any overages have no coverage under PPP loans.
Things To Keep In Mind
It’s essential to realize that the loan are only forgiven when the borrower follows the guidelines outlined in the CARES Act. The Paycheck Protection Flexibility Act passed in June updated some of the original guidelines. One of those stipulations is your company maintains the same number of employees throughout the covered period as it did throughout the previous year. In basic terms: You can't be eligible for a loan forgiveness if you lay off your employees.
Where To obtain a Paycheck Protection Program Loan
Local lenders is going to be providing these financing options, so check with your lending institution to create an appointment when PPP lending officially begins again. To organize, use this helpful checklist in the US Chamber of Commerce. You’ll also want to check out our list of 6 lenders currently offering second round PPP loans.
At the moment, you will find over 1,800 finance companies and banks preapproved using the SBA to help meet the need and respond to the latest rush of applications. And yes, you will see a rush, so get all of your information ready now and be prepared to apply when applications start getting accepted again. Experts say it’s best to go through an FDIC-insured bank (other lenders may be brokering for a small fee — best to go to the source), and anecdotally, small banks and credit unions have had better success.
Another option is to work with a matchmaker; a lot of those lenders are working around the clock on COVID-related funding. As a next resource, browse the SBA Preferred Lending Partners.
Here are three lending vendors that'll be offering Paycheck Protection loans:
Lendio
Lendio is another loan matchmaker and will work on account to aggregate loan options. Links to try to get PPP loans will available on Lendio’s site. Lendio makes it simple to apply and compare options, and it advertises funding within Twenty four hours. Because of the the CARES Act, there are no fees for that borrower.
Get Began with Lendio
Read our in-depth review
Credibly
Credibly has funded small businesses with more than $1 billion and it is equipped you will need to help with PPP loan requests. Customer support is efficient and will also be able to walk first-time borrowers with the process with efficiency.
Get Started with Credibly
Read our in-depth review
BlueVine
BlueVine is an online lending service focused on helping small businesses conquer their borrowing struggles. Just like the very first funding round, BlueVine is going to be assisting with PPP loans and working diligently with businesses to submit paperwork to the SBA and secure funds. With a big pivot, Blue Vine is making PPP loans important and is a valuable option. Lending information is available on the leading page of BlueVine’s website.
Get Began with BlueVine
Read our in-depth review
Fundera
Fundera is a popular matchmaking service that pairs applicants and lenders from its pool of partners. If you apply for the PPP through Fundera, the same principle applies: Fundera will shop the application amongst its network of SBA-approved lenders. Considering some of the bottlenecks applicants have run into with traditional lenders, this may not be a poor option for companies that want to maximize their chances of getting their application with the rush.
Get Began with Fundera
Read our in-depth review
More About PPP Loans
No matter where you ultimately choose to apply, it’s vital that you get your payroll information ready and be one of the first to leap around the PPP loan train. It's anticipated that this latest round of funding will be quickly depleted. With loan forgiveness options and generous terms, this is a great opportunity, consider the totality of these loans is capped, the necessity might outweigh the time, and the key is quick efficiency. May the odds be ever to your benefit.
Looking for additional resources as we continue to navigate this pandemic? Our coronavirus hub is packed filled with useful information for businesses. Have any questions for us? Leave them in the comments, and we’ll help lead you to the right place to find your answer.
