The year 2020 was an unstable year for many businesses in the United States. Consumers started getting their services and products from big-box retailers online since the shutdown. The negative impact on the economy due to this downturn of the economy affected small businesses.
Related Topics (Ads):
The Congress included the Paycheck Protection Program(PPP) in the CARES Act [1], to the existing essential small business provision that now gave forgivable loans to small businesses to support them financially. Other sections of legislation such as providing funds when the initial funds ran out and moving the deadline, are also written in the CARES Act after the PPP loan.
What Is the Task of Paycheck Protection Program?
It was created in the year 2020 on 27th March. The Paycheck Protection Program [2] offers financial resources to small business during the financial crisis to manage their payroll. Congress was forced to pass a bill which added $310 billion to the original $349 billion that quickly disappeared in the economic support for small businesses.
What Kinds of Business Can Qualify to Receive a PPP Loan?
Every business which operates with fewer or 500 employees qualifies to receive a PPP loan. The comprise of:
- C corporations LLCs;
- Faith-based Groups;
- Small Businesses;
- Veterans Groups;
- S Corporations;
- Private non-profits;
Sole proprietors and independent contractors who are self-employed can also get the PPP loan.
PPP Loan Terms.
The national government permits borrowers to receive the cost of their monthly average payroll up to two and a half times for a whole year until the government approves the loan, due to the difficulty of the financial crisis. For instance, for twelve months a small business with an average monthly payroll of $40,000 will be eligible to receive $10,000 before the approval of the PPP loan.
In 2020 the maximum that a PPP loan could offer to a small business was $10 million.
A Second Draw PPP Loan for Small Businesses. [3]
The approval of PPP loans exceeding five million was done by the federal government before the end of the year 2020. Application of a second draw loan of PPP loan is available for the small businesses which want more help.
The restrictions and terms for application for another draw PPP Loan are different from the previous requirements of the PPP loan. For instance, the national government has regulated the amount of funds approved for another draw PPP loan for $2 million. Due to continuous economic crisis the small businesses which need a second financial help have a chance to apply for a PPP loan on a second draw until May 31, 2021.
Related Topics (Ads):
How Does One Become Eligible for a PPP Loan on a Second Draw?
The major aim for a second draw PPP loan is to assist the small business which has been strike hard due to the financial downturn. Another draw for a PPP loan is much more aimed for. In order for a small business to be eligible to receive a second draw PPP loan their business must:
- Have less than 300 employees;
- Used all the funds they had applied for the first PPP loan;
- Compare their gross sales [4] of a quarter of 2019 and 2020 and show at least twenty-five percent decrease in their gross sales.
Ways of Spending the Funds.
There is a systematic way of spending the funds received from a second draw PPP loan. The small business must spend a minimum of sixty percent of the funds on payroll. The rest of forty percent in the small business may go to other working cost which include:
- Workers Protection;
- Computer Expenses;
- Supplies;
- Utilities;
- Mortgage or rent Payment.
How Does an Individual Apply for a PPP Loan? [3]
After a small business requests for a PPP loan, Small Business Administration (SBA) forwards the application to its associate. The owner of the small business together with his associate forwards the application. The associate then forwards the application to one among the lenders of the PPP Partners approved marketplace.
If your completion application is not submitted up to a later date, you can access your application through resetting your password with the email address you used when submitting the application first. Edit the application after you log in using a new password in order to remain with your application for the PPP loan.
The main steps for submitting an application for a PPP loan [4] include:
- Verifying or adding business information;
- Confirming ownership;
- Including the new conditions for business information;
- Adding the owner’s information;
- Uploading verification documents.
Monitor you email for further directions from the SBA lender or partner, after you submit your application for a PPP loan.
Your associate then moves to the lender marketplace, after the SBA confirms your application with him. You will receive a confirmation message on your email from the lender reviews and approves your application for a PPP loan. Go through the confirmation email precisely, and make sure you obey all the instructions.
After receiving the confirmation approval email for your PPP loan, forward a copy to the lender with a voided check which designates the place where the lender will send the money. Within ten days the owner will receive their PPP loan after approval by the lender.
You can apply for this PPP loan online or using a managed application without any issues. [5]
Related Topics (Ads):
What is Next Step?
One of the most essential new events that occurred as the deadline for submitting applications for PPP loans almost expired on March 31, 2021. The Congress extended the deadline through almost a unanimous vote.
The goal of Biden’s administration is to help the smallest business improve from the effect of the economic crisis. SBA is approving loans for business with less than twenty employees from permission of a fourteen-day window.
The remaining issue is: what will happen after the May 31 deadline for forwarding PPP loan application expires? Will the small business be able to stand on their own after this crisis or Is there need for the Congress to pass additional bill to help out the small businesses in economic crisis?
Owners of small business must stay productive in being ready for growth, and obtaining steady operations.
Have you been stressed lately because of the economic crisis? Worry less because PPP loans can boost your small business in a great way. As we have seen it helps you on your payroll and other business activities, make sure you apply for a PPP loan to help your business.
