It’s been a hard year for small businesses. But passionate, dedicated small business owners like you are prepared to weather the storm. And the paycheck protection program (PPP) is here to help.

The second round of PPE is open. The program will help secure loans for small business owners in 2021.

Below you will find a comprehensive guide to round two of PPP with everything you need to know to protect your business and employees.

Loans For Small Business Owners

The 2020 COVID-19 pandemic caused many small businesses to shut down for an extended period of time. The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed as a way to help businesses pay employees and keep their company running.

As part of the CARES act, small businesses could apply for PPP loans to cover payroll and business expenses. This legislation was passed in the spring of 2020 and the second round of funding was recently approved.

When And Where To Apply

As of January 13th, 2021 the US Small Business Association (SBA) is accepting applications for business loans for small business owners as part of the CARES act. Applications will be accepted until March 31, 2021. You can find PPP lenders on this site.

The terms of the PPP loan are the same regardless of the lender. You can find the PPP loan application on the SBA website. If you applied for the first round of PPP loans, you may still be eligible for round two. If you did not apply for round one of PPP loans you also may be eligible.

Eligibility Requirements For Round Two Of PPP

Eligibility for round two of PPP loans depends on a few factors.

  • Your small business has fewer than 300 employees (including full-time and part-time)
  • Your small business is currently operational and has been since February 15, 2020
  • Your small business lost at least 25% of total revenue in the first three fiscal quarters of 2020 (compared to 2019)
  • You have already spent or will spend all the money from the first round of PPP loans

PPP loans may be granted to sole proprietors in the form of personal loans for small business owners. Independent contractors, self-employed individuals, and seasonal employees may also be eligible for PPP loans. Non-profits and faith-based organizations may apply for the second round of PPP loans as well.

If your business does not meet the criteria above you are most likely not eligible for a PPP loan. And if your business has defaulted on a loan from the SBA or federal government, your business will not be eligible.

How Much Money Will Be Given

In total $284 billion will be given through PPP loans. In the first round of PPP small businesses could apply for up to $10 million. However, in round two it will only be up to $2 million.

The total amount awarded to the business will depend on the cost of payroll. Businesses can apply for enough funds to cover 2.5 times the monthly cost of payroll. Food and restaurant businesses can apply for 2.5 times monthly payroll costs.

It is likely that a business will receive the same funding during round two as they did in round one unless their situation has changed dramatically.

Loan Forgiveness For Small Business Owners

As long as a business uses its PPP funds as they were intended, the loan will be forgiven. In this way, the PPP loans are more like grants because they do not need to be paid back.

PPP funds are meant to cover things like payroll, rent, and utilities. At least 60% of PPP funding must be used for payroll purposes. The other 40% can be used for other business expenses.

PPP funds should not be used for non-business purposes because that will prevent the businesses from loan forgiveness. Businesses have 24 weeks (about 6 months) to use their PPP funds.

Terms Of PPP Loans

Lenders have guidelines they must follow when it comes to PPP loans. All PPP loans given in round two will have a fixed 1% interest rate. The lender may not charge a yearly fee or a guaranteed fee.

Additionally, the lender may not charge a prepayment penalty. This means that a business can repay their loan faster than originally scheduled. Finally, a lender may not ask a business for collateral or a personal guarantee for their loan.

Tax Deductible PPP Funds

In round one of PPP loans, expenses were not deductible. Under the new bill, purchases using PPP funds are tax-deductible. This is a significant change from round one to round two and will help small business owners even further.

If you have additional questions about taxes or how to use your PPP funds, you can work with advisors that provide SBA loan assistance.

Questions About Round One And Round Two Of PPP

There are several changes to the second round of PPP in order to best support small businesses. Some small business owners seeking loans still have questions about the difference between the two rounds of support.

One of the biggest differences is that the number of employees eligibility criteria went from 500 to 300. So, if your company is 300 people or less you are still eligible for round two. However, if your company has more than 300 you may not be eligible for round two.

If your company received funding for round one, you can still apply for round two unless one of the new criteria prevents you from doing so.

If a company received a first round PPP loan it is not required for them to apply for PPP forgiveness before applying for the second loan.

Keeping Your Small Business Healthy

The PPP loans for small business owners could help the US economy greatly over the next few years. COVID-19 hit not only the health of the people in the country but also the health of the economy through small businesses.

If you own a small business, do freelance work, or are self-employed, consider applying for round two of PPP loans before the end of March.

If you need advice about your small business or are looking to apply for a PPP or disaster loan, call us at 954-434-1296 or contact us online.

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