Is your business still struggling with COVID-19?
Applications are underway for a new round of Paycheck Protection Program loans worth more than $ 284 billion for businesses that need help paying their bills. Those who received funds in the first edition last year can reapply from Wednesday if they meet certain criteria.
The forgivable loans are guaranteed by the US government and are meant to encourage small businesses to keep their employees on the payroll. Loans are part of the $ 900 Pandemic Relief Bill The congress passed last month.
Last year, the first round of PPP loans ended in 13 days, in part because large publicly traded companies emptied the funds. Some of the help also went to people who should not have received it.
In Florida, there were potentially over 100 non-eligible PPP loans reported in an analysis of nearly 4.5 million PPP loans under $ 150,000 by the Miami Herald and the non-partisan Anti-Corruption Data Collective, a nonprofit group of journalists and data scientists researching the corruption.
Another investigation by the Miami Herald and the Anti-Corruption Data Collective, this one into larger P3s loans, also found that Florida accounted for almost one in four doubtful PPP loans at the national level.
While the system has had its problems, the program has helped keep many businesses open, including in South Florida. Now, companies that need it can use it again.
The application process can be confusing, even if it’s not your first time going through it. Here is a guide to help you:
What does a PPP loan cover?
A loan under the Paycheck Protection Program covers salary costs, including benefits such as housing allowances; vacation; and parental, family, medical and sick leave. The funds can also be used to cover operating costs, including rent, utilities, and personal protective equipment to protect workers from COVID-19.
At least 60% of the total loan must be used on payroll expenses if you want the total loan forgiveness. More on that later.
The loan excludes sick pay and family leave wages which qualify for a refundable tax credit under the Families First Coronavirus Response Act. There is also an annual compensation of $ 100,000 per employee limit.
Learn more about the exclusions at https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-required-paid-leave-provided-by-small-and-midsize-businesses-faqs
Who can apply for PPP loans?
Small businesses with 500 or fewer employees can apply, according to the program’s interim guidelines. This includes veterans organizations, tribal businesses, sole proprietors, independent contractors, and eligible self-employed workers. For the first time, news and some non-profit organizations will also be eligible for funds.
If you received a PPP loan last year and want to reapply, you can do so. The company must have no more than 300 employees and must be able to demonstrate a 25% decrease in gross sales in any quarter of 2020 compared to the same quarter in 2019. must have used or will use the total amount of the previous PPP loan.
Some businesses with more than 500 employees may be eligible if they meet the definition of a “small business” and the SBA’s employee-based or income-based size standard for its industry. To check the standard size for your industry, visit sba.gov/size.
A business does not need to qualify as a “small business” to be eligible for PPP, but you must meet other criteria, according to the US Small Business Administration’s FAQ PPP guide. Any business that applies for a PPP loan must be opened, although it may be temporarily closed or suspended.
Listed companies, companies specializing in politics, lobbying or having extensive relations with China are excluded from the PPP loan application, according to AARP. Concert halls, theaters and museums are also not eligible for PPP loans, but may apply for “Subsidies to operators of closed sites” worth up to $ 10 million, according to the Tampa Bay Times.
For the full list of eligibility criteria, visit sba.gov, click “Coronavirus Relief Options” under the Funding Programs tab, then click “Paycheque Protection Program.”
How much can I get?
Like last time, loan amounts will be based on the applicant’s payroll, which can use 2019 or 2020 numbers. Seasonal businesses will use a different calculation.
The maximum possible loan amount is $ 2 million, which is less than the previous $ 10 million limit. If this is the second time your business has applied for a PPP loan, it can borrow an amount equal to 2.5 times its average monthly salary costs, according to the Wall Street Journal.
Businesses like restaurants and hotels that are classified as “accommodation and food services industries” by the Small Business Administration are an exception. These businesses have been hit hard by the pandemic and are eligible for loans up to 3.5 times their average monthly wage costs, MarketWatch reports.
How do I apply for the Paycheque Protection Program? What is the deadline?
Only loan requests from community financial institutions will be agreed for now to prioritize businesses owned by minorities, women and veterans, according to the Small Business Administration.
“Community lenders are specially designed institutions that focus on undeserved borrowers, including businesses run by women and those run by black, Latino, Asian and other minority owners, ”according to the New York Times. These types of lenders make up about 10% of the over 5,000 SBA lenders.
This means South Florida business owners could gain an advantage this time around due to the region’s diverse demographics.
Officials have not said when major banks, credit unions and lenders will be allowed to start processing loans. Check with your lender to see if they are participating in the program. You can also find a list of participating lenders by state at sba.gov. The website also offers a free online tool that can help you connect with Community financial institutions and small lenders approved by the SBA.
If this is your second time applying for a P3 loan, you can avoid some red tape if you use the same lender and payroll figures as of 2019, according to MarketWatch.
The deadline to apply for a P3 loan is March 31 or until the program runs out of funds, whichever comes first. The maturity rate for PPP loans (maturity date for full loan repayment) is five years.
Can my PPP loan be canceled? What are the requirements?
PPP loans can be canceled in full, but this will depend, in part, on salary costs over a period of 8 to 24 weeks, from the date your business receives its loan, depending on the rules of the program.
Remember that at least 60% of the total loan should be used for salary expenses and no more than 40% can be used for non-salary costs (like utilities and rent) if you want it. total loan forgiveness, as directed. Your lender can provide you with the correct form which you will need to complete and submit along with the supporting documents.
Expenses paid with a PPP loan, even if they are waived, can also be deducted from the 2020 taxes of your business.
To learn more about the program and other resources available to businesses, visit sba.gov.
Miami Herald editor-in-chief Yadira Lopez contributed to this report.