What the SBA PPP Extension Means for Your Small Business

Is the Paycheck Protection Program Extended?

If you waited to apply for COVID-19 aid for your small business, it's time to take action. US President Donald Trump has extended the PPP application due date to August 8, 2020, from its previous deadline of June 30 through the Paycheck Protection Program Extension Act.

Is PPP Money Still Available?

The short answer is yes. While the first round of PPP loans ran out of money, more government funds have since been made available. The US Senate has said that this new round of loans will target specific industries that are struggling, such as restaurants and hotels.

The main goal of a PPP (Paycheck Protection Program) loan is to help small businesses keep employees on their payroll through these current economic hardships. Loans can be as high as $10 million per eligible applicant. Each business's amount is based on their own average payroll. You can also use the money for rent, mortgages, and utilities as long as 75% of the total loan is used towards payroll costs.

How to Apply  

This deadline extension can provide many great small businesses with the money needed to survive this crisis. You can apply through any bank licensed to lend SBA (Small Business Administration) 7A loans. Any participating bank or savings association insured by the federal deposit insurance corporation, federally insured credit unions, or the Farm Credit System can also provide loans.

The SBA has size standards that must be met for each small business to qualify for a loan. There must be at least one physical location, and each location must employ less than 500 people. You must have operated as of February 15, 2020, with employees receiving payment from an official payroll recorded on a Form 1099-MISC. Above all, the number one requirement is a significant need created by the coronavirus pandemic.

Tax-exempt nonprofits and veterans organizations are all eligible for a PPP loan. Sole proprietors, independent contractors, and self-employed persons can also apply.

Can You Apply for More Than One PPP Loan?

No. It was decided in cooperation with the Administrator and Secretary that eligible businesses may only receive one loan. This is put in place to allow all businesses in need to have a chance at receiving a PPP loan. Because of this limit, it is crucial to apply for the maximum loan amount possible for your situation. Following these requirements will keep as many people paid and employed throughout the current uncertainties of the US job market as possible.

Will the PPP Loan Be Forgiven?

If you retain all employees and the funds are appropriately used for approved resources, the SBA will forgive the entire loan. The program prioritizes maintaining employment, but the loan has room to work with you should hard decisions come up.

If you have to let some employees go, you can still have a piece of your loan forgiven, proportional to the percentage of employees still there. Your headcount directly correlates with the reduction of funds. If people previously let go are rehired by the application deadline, you can still receive full forgiveness.

What Are the Terms of the PPP Loan?

Paycheck Protection Program loans have a 1% interest rate. If loans were applied for and given out before June 5, businesses have two years to make their final payment. Any businesses issued a loan after June 5 have a five-year deadline to get their final payment in.

Making the actual payments will be pushed back for six months to give businesses a chance to breathe and work through this pandemic. You do not need a signed document guaranteeing the payback of these loans through personal or group assets. No government fees will be charged to small businesses.

Businesses can offer an "alternative payroll covered period" to calculate payroll costs that align with the original employees' payment cycles. After receiving your loan, you can include payroll and other approved expenses in the following 24 weeks.

To confirm loan forgiveness eligibility, the CARES Act provides specific calculations to help you figure it out. A new exemption for loan forgiveness has been added to help businesses who have at least made a serious written offer to rehire those let go before the application deadline.

What Happens When PPP Runs Out?

Money through the PPP has run out quickly before and required multiple waves of replenishing. It's logical to question what's next if it runs out again during this extension. We don't yet know if funding will continue after August 8.

Fortunately, there are many other resources, both local and national, that provide financial help and other services to small businesses.

Other Small Business Relief Programs

CARES Act

The PPP loan is underneath an overarching relief program, the CARES Act (Coronavirus Aid, Relief, and Economic Security Act), to help all businesses during this uncertain time. Totaling $2 trillion, this senate bill is the biggest stimulus package in US history. You can learn more about the CARES Act on the SBA's website.

EIDL

Another program led by the SBA is the EIDL (Economic Injury Disaster Loan.) This project includes capital loans for small businesses and nonprofits affected by COVID-19. These loans could total up to $2 million for all businesses with fewer than 500 employees as well as sole proprietors. You can find the EIDL application here as well as some more information.

EIDL Emergency Advance

While in the application process for the EIDL loan, you can request an emergency grant up to $10,000. If you don't receive an EIDL, you can still get this advance.

The SBA calculates how much you can receive based on your number of employees before the pandemic, using the headcount you had as of January 31, 2020. The payment is distributed as $1,000 per employee for up to 10 people (total equaling $10,000.) If you are a sole proprietor, you can receive $1,000 for yourself.

This advance aims to make ends meet by assisting with payroll costs, rent, and any other financial assistance. You can access the Emergency Advance application and more information on the SBA website.

State and Local Resources

Many cities and states developed their own loans and aid for local businesses having a hard time during coronavirus. The SBA offers a way to search for specific relief in your community.

You Are Not Alone

Small businesses are facing unprecedented challenges. Never feel like you can't ask for help.

There are many resources available to aid you in finances, strategy, and overall support for what you do for your community. Here at Swyft Filings, we want to keep you creating and serving those around you. Take a look through our learning center for more help and resources for keeping your business up and running to the best of your ability.