4 reasons why you should apply for a second PPP loan – Forbes Advisor


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the Paycheque Protection Program (PPP) is back and now includes the ability to request a second fundraising. Now, any eligible business can apply for a PPP loan, whether this is their first time applying for the Small Business Assistance Program or looking for another installment of financial support after receiving a first loan. The deadline to apply is March 31.

But just because more money is available, does that mean you should apply?

“As long as you qualify for the second draw and are still in business with employees and normal operating expenses, it’s very beneficial for you to take the money,” says Benjamin Johnston, COO. from Kapitus, a provider of small business finance. The company, through partnerships with Cross River Bank and several others, has assisted hundreds of businesses with the application process over the two PPP funding rounds.

Here are four reasons why a second PPP loan can be beneficial for your bottom line:

1. There is more money available for the hardest hit sectors

Not all the hubs in the world are enough to get businesses that rely on crowds of people back on their feet. The catering and hotel sectors were particularly affected. The latest legislation aims to provide a greater helping hand to those applying for a second PPP loan.

Any eligible business in the accommodation and food service industries that requests a second draw is eligible to receive up to 3.5 times their 2019 or 2020 average monthly payroll costs, up to a maximum of $ 2 million. Other types of industries can only apply for a second drawing loan up to 2.5 times their average monthly wage costs for 2019 or 2020, up to $ 2 million.

Already, these improved second loan terms have proven to be attractive to those who qualify.

“About 90% of the volume we’ve seen so far is second loans,” says Chris Giamo, head of commercial banking at TD Bank. “I think this underlines that the hardest hit companies really needed another round of stimulus here, and for the record, what we’re hearing is that most of the second-draw applications are coming from restaurants and hospitality sectors and live events. “

2. Loan forgiveness is supposed to be easier

Since the creation of the PPP as part of the March 2020 program CARES Law, the rules and eligibility conditions surrounding the forgivable loan program have undergone multiple iterations and clarifications with the aim of broadening the definition of who may be eligible for a loan, as well as broadening the criteria for loan cancellation.

The most recent Small Business Administration (SBA) guidelines state that discount on a PPP loan on the second drawdown will be based on whether:

  • Your business uses the money within a covered period of eight to 24 weeks after the loan is disbursed
  • You have a maximum of 300 employees (first draw loans are capped at a maximum of 500 employees)
  • The loan is used for at least 60% of your payroll costs, and the number of employees on the payroll and their pay levels remain the same during the covered period in which you use the money
  • You can show that your business experienced a reduction of at least 25% in gross revenue between comparable quarters in 2019 and 2020
  • You’re not asking for more than $ 2 million; the amount awarded will be based on the applicant’s payroll
  • And, with the passage of the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA) in December 2020, the IRS and the Treasury confirmed that a canceled PPP loan is not considered taxable income, thereby eliminating fears. that there is a tax burden for those who have subscribed to a PPP. funds.

3. The remittance form for small PPP loans has been simplified

The IRS released on January 19 the most streamlined version of its pardon application to date: the two-page version Form 3508S, which allows businesses that have received PPP loans of $ 150,000 or less to self-certify that they have used the funds for eligible expenses.

This form was intended to help small businesses who may have found the prospect of applying for a PPP loan and completing the previous administrative requirements for forgiveness too overwhelming to be pursued.

Be aware that even with self-certification, a business may still be asked to produce proof of reduced income for up to four years after the rebate request if there is an audit of its loan. The second loan forgiveness request specifically states that a PPP loan recipient “must keep all records necessary to prove compliance with the Paycheck Protection Program rules for four years for employment records and for three years. for all other files ”.

4. If you do not qualify for forgiveness, it is still a low risk loan.

Even if you are not eligible for full or partial loan forgiveness, applying for a PPP loan is still one of the best deals for a business looking for a cash injection.
“What to keep in mind is the beneficial aspect of the interest rate, it’s still 1%,” says Brian Marks, professor of economics at the University’s Pompea College of Business. of New Haven, Connecticut.

You will need to repay a non-repayable PPP loan within five years. You can also prepay it without penalty or delay the start of your loan repayment for up to 10 months after you receive your funds.

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