Financial Affairs

PPP loan applications are now open for small businesses: all you need to know

The paycheck protection program, a vital lifeline that has helped keep the pandemic ravaged small enterprises Afloat, reopened to applicants on Monday with several key changes put in place to eliminate fraud and abuse.

In an attempt to rectify past criticisms that the program favored larger borrowers, the bailout fund – which provides forgivable loans to businesses if they maintain their payrolls – will initially only be available to first-time borrowers. , second-time applicants may apply on Wednesday, under new guidelines from the Small Business Administration and the Treasury Department.

The federal government will also prioritize minority-owned businesses during the first two days of the program by only accepting loan applications from select lenders who focus on underserved communities. Although the federal government supports the loans, the money is issued by financial institutions such as banks, credit unions, and community lenders. Most lenders who have been in previous cycles are expected to do so again.


“These updated guidelines improve targeted PPP relief for small businesses most affected by COVID-19,” Treasury Secretary Steven Mnuchin said in a press release. “We are committed to quickly implementing this cycle of PPP to continue supporting American small businesses and their workers. “

Congress established the rescue fund earlier this year with the passage of the CARES Act at the end of March. Lawmakers authorized an additional $ 284 billion last month to provide a second round of small business forgivable loans as part of its more comprehensive $ 900 billion COVID relief plan, bringing the total value of the program’s funding to $ 806 billion.

At least $ 40 billion has been set aside for businesses with 10 or fewer employees and for loans under $ 250,000 in low-income areas.


The relaunched program is expected to bring much-needed relief to the U.S. economy after employers unexpectedly cut 140,000 jobs in December amid a nationwide spike in COVID-19 cases.

While the eligibility formula is the same for new applicants, only businesses with 300 or fewer employees are eligible for a second loan, which will be capped at $ 2 million. Borrowers looking for a second forgivable loan must also prove that they saw their gross receipts drop by 25% in one quarter in 2020 compared to the same quarter in 2019.

Second-time borrowers who take out loans of $ 150,000 or less will not be required to immediately provide documentation proving a 25% reduction in revenue and may do so prior to requesting a forgiveness, as per the rules.

In the first round, companies with fewer than 500 employees could receive up to $ 10 million.


Businesses will still be required to spend at least 60% of the money to maintain the payroll so that the government cancels the entire loan. The remaining 40% can be spent on operating costs such as mortgages, rent, and utilities.

At the start of the program, he was heavily criticized for giving aid to publicly traded companies that had other ways of relieving themselves – even if small businesses languished. The SBA and the Treasury Department, which jointly administered the program, scrambled to close the loopholes which allowed multi-million dollar companies to tap the fund, including committing to audit any loan worth over $ 2 million.

Over the course of about four months, the PPP distributed about $ 525 billion in forgivable loans to 5.2 million businesses, saving about 50 million jobs, according to the SBA. The program was closed to new applicants at the end of July with around $ 38 billion remaining in the fund.

The program is expected to close to all borrowers on March 31.

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