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Updated: January 25th, 2021
Finally, the Paycheck Protection Program (PPP) is back. The program and funds will be available until March 31, 2021, or until funds have been exhausted (whichever comes first). After burning through $523 billion in government-backed loans last year, Congress has restarted the program with $284 billion in new funding.
“A second round of PPP could not have come at a better time, and the SBA is making every effort to ensure small businesses have the emergency financial support they need to continuing weathering this time of uncertainty,” said SBA Administrator Jovita Carranza.
However, this time around, there are a few changes that’ll impact eligibility and loan sizes.
Curious if you qualify, and if so, for how much? Like all things with the government, the details are in the fine print. Let’s take a look at PPP 2.0.
If your business didn’t receive a PPP loan last year, you’re eligible to apply for a first draw PPP loan now. And even if you did receive a PPP loan in 2020, there’s a chance you’re eligible for a second draw.
In general, your business will have to meet the following criteria to be eligible for a first draw loan:
In general, your business will have to meet the following criteria to be eligible for a second draw loan:
These new loans (whether it’s your first draw or second draw) have the same terms as the original PPP loan:
Select lenders and borrowers could start making loans starting January 11 (to minority- and women-owned businesses that were underserved last time around). Small lenders ($1 billion or less in assets) will be able to submit applications starting January 15, and general applications will be available beginning January 19.
PPP funds are limited and will be disbursed until March 31, 2021, or until funds have been exhausted—whichever comes first. As we saw in 2020, these funds will go quickly, and a flood of applications will overburden most lenders (especially the big banks). Fortunately, Congress allocated additional funding last year to satisfy all applicants, but the delay meant many businesses had to wait around longer for funding.
However, the Treasury Department believes this $284 billion will be enough to fund all qualified applicants. Still, you’re probably better off applying sooner rather than later. Get your application in as soon as possible.
First-time loans are capped at 2.5 times your average monthly payroll costs, with a maximum $10 million limit.
Second PPP loans use the same 2.5 times calculation, but they’re capped at $2 million. However, hard-hit industries (such as accommodation and food services) can borrow up to 3.5 times their average monthly payroll costs.
Give our Paycheck Protection Program Loan Calculator a try to see how much money you may qualify for.
Last year’s PPP loans were limited to payroll costs, rent, and utility expenses. PPP 2.0 loans have expanded the list of eligible expenses to include operations expenditures, property damage costs, supplier costs, personal protective equipment, and utilities.
However, keep in mind that you’ll need to spend a certain percentage of your loan on payroll to qualify for loan forgiveness. Here’s what you need to know.
To qualify for loan forgiveness, you’ll need to spend at least 60% of your loan on payroll costs, meaning no more than 40% of your loan can be spent on other eligible expenses.
Forgivable expenses must be made in the 8 to 24 weeks covered period after your PPP loan has been disbursed (up until March 31, 2021).
You’ll apply for loan forgiveness with the lender that issued your loan—not the SBA. Your lender should send you follow-up information regarding further instructions about forgiveness and how to apply.
If you already got a PPP loan last time around, the best place to go is to your original lender. You’ll need to provide some updated documentation, but they’ll likely be able to expedite your application if you’ve already been funded through them.
If that’s not an option, or you want to switch your lender, you can also apply for a PPP loan with Funding Circle.
If you received your first PPP loan through Funding Circle, here’s what your 2nd application looks like:
If you’re using Funding Circle for a PPP loan for the first time, you’ll have to complete an initial application—but this should take less than 10 minutes.
Michael Jones is a Senior Editor for Funding Circle, specializing in small business loans. He holds a degree in International Business and Economics from Boston University's Questrom School of Business. Prior to Funding Circle, Michael was the Head of Content for Bond Street, a venture-backed FinTech company specializing in small business loans. He has written extensively about small business loans, entrepreneurship, and marketing.