The U.S. Treasury and the Small Business Administration (SBA) opened the door on $284 billion in new Paycheck Protection Program (PPP) loans for small businesses struggling during the pandemic, and the race to apply has already begun.
Does Great Lakes Business Credit offer PPP loans? It does not. However, community-based banks and other lending institutions will be processing loan applications. The first round of PPP loans, which had $522 billion in funding behind it, evaporated in just months, so it’s important to understand and apply for these loans as fast as possible.
About PPP Loans
PPP loans are forgivable loans, meaning the money doesn’t need to be repaid if it meets the criteria laid out by the Small Business Administration. They have an interest rate of 1% and the current batch will mature in five years. The loans require no collateral and come without fees.
Borrowers must spend at least 60% of the loans on payroll, with the other 40% going to other eligible operating expenses.
Already, businesses that borrowed in round one of the PPP loans have seen their loans forgiven.
What’s different in round 2?
The PPP loans in April met with intense scrutiny as larger businesses applied for millions of dollars and minority-owned businesses went underserved. Also, guidance on how borrowers will get taxed on the loans has been cleared up.
This time, to prioritize smaller businesses in need, businesses that did not receive a PPP loan before will be eligible for the loans first. Loans max out at $2 million, rather than the old cap of $10 million.
Who Can Apply for PPP Loans?
From the SBA, here’s who can apply:
- Any small business that meets SBA’s size standards. (either the industry based size standard or the alternative size standard)
- Sole proprietors, independent contractors, and self-employed persons.
- Any business with a NAICS Code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location.
- Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans’ organization, or Tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of: 500 employees, or that meets the SBA industry size standard if more than 500.
Importantly, businesses that did not receive a PPP loan in the first round will have first access to the loans. Also, the businesses will have to show a 25% drop in revenue from any 2020 quarter to any 2019 quarter.
How to Apply
The SBA provides a lender match portal, where borrowers can complete a brief questionnaire and then get matched with an approved lender within two days. The SBA will initially only lend through smaller community financial institutions before opening the loans up to all lenders.