The U.S. Treasury and Small Business Administration said they will open the program to all small businesses soon. While there is no exact date yet, the Consumer Bankers Association said it expects this to happen sometime during the week of January 18.
The latest Covid relief package signed into law at the end of December included $ 284 billion in additional lending to eligible companies, including those that had already taken out a loan months ago.
Here are six ways the program has changed in this latest round:
Companies may now take out a second PPP loan. Companies that received a PPP loan when the program enters into force now may apply for a “second draw”, as long as it is not a public company, does not employ more than 300 people, or has used or will fully use the first PPP loan for uses. And it could show a decrease of at least 25% in total receipts in the first, second or third quarter of this year compared to the same quarter of 2019.
Target funds are provided to the most vulnerable companies. Specific amounts – ranging from $ 15 billion to $ 25 billion – are earmarked for community development financial institutions – which typically lend to minority-owned businesses in disadvantaged communities – and to companies with fewer than 10 employees, as well as those in a low-income category.
Restaurants can take out larger loans. Most qualified companies may receive a loan equal to 2.5 times the average monthly salary expenditures, just as before. But restaurants and housing companies may now apply for loans equivalent to 3.5 times the monthly salary.
However, no loan may exceed $ 2 million, down from the previous $ 10 million cap.
There is greater flexibility in how the loan is used and fully forgiven. To get full PPP exemption, at least 60% of the funds must be used to cover payroll expenses. But the remaining 40% or less can be used to cover a greater range of business expenditures than was the case during the initial PPP lending rounds.
In addition to mortgage benefits, rent and utilities, the loan can now be used to cover PPE and other expenses incurred to meet Covid restrictions, as well as some operations, property damage and supplier costs.
The tolerance process is simpler. In order to be exempt from the PPP loan, companies that have borrowed $ 150,000 or less will simply need to present a one-page certificate that includes the number of employees the business has retained as a result of the loan, an estimate of how much the loan is being spent on the payroll and the total loan amount. Borrowers must also certify that the information is accurate and that they have complied with the loan requirements.
This should help many of the smaller companies that received PPP loans during previous lending rounds. According to the Small Business Administration, 87% of loans have been under $ 150,000.
The tax exemption for recipients of PPP loans has become larger. While the loans would be tax free to beneficiaries if they were used for authorized purposes, the latest Covid relief package increased the desalination of the pot.
Companies usually deduct their payroll and operating expenses from their gross income. Now, even if these expenses were largely paid for via the tax-deductible loan, they would still be deductible.