Small businesses across the country have been struggling since the COVID-19 pandemic began and many were forced to close their doors and/or change their business models. The Paycheck Protection Program (PPP) was created by Congress to provide relief for small business owners across the country.
PPP loans have been especially attractive due to one key feature: the fact that they are forgivable, provided that small business owners adhere to rules. But those rules have changed — for the better — since those loans were first issued.Securing a loan is much easier than previously thought.
Spend less of your loan on payroll and still be forgiven
Originally, to have your PPP loan forgiven, a business owner was required to spend 75% of the loan on payroll costs. That was easy to comply with for businesses that had existing staff and many payroll employees.However, many small operations complained that the 75% threshold left them with too little money left over to cover other essential operating costs like rent payments and utilities. Modifications have lowered the threshold to 60%. This means businesses can spend 40% of loan proceeds on non-payroll costs and still be eligible to be forgiven. In addition, businesses that do not meet that 60% requirement may still be eligible to have a portion of their PPP loans forgiven.
More time to use the loan amount
The initial PPP loan program required small businesses to spend their funds within eight weeks of the date they received their loan. Many small business owners felt that timeframe was too restrictive — especially for operations that are more seasonal in nature, such as a commercial maintenance business like Executive Image Building Services. The eight-week period was extended to twenty-four weeks, so small business owners now have a lot more time to spend their funds and still qualify for loan forgiveness.
More time to rehire laid-off or furloughed staff
The main goal of the PPP loan program was to prevent layoffs and keep employees working during deteriorating economic conditions. It was also designed to encourage businesses that had laid-off or furloughed staff, to rehire those employees back to their jobs. Business owners who rehired laid-off staff would be eligible for loan forgiveness provided those people were put back on their payroll by June 30, 2020. Recently, the deadline for rehiring staff was extended to December 31, 2020 giving businesses more time and flexibility.
The time to apply for a PPP loan has passed
When the PPP program was first introduced, it ran out of money in a few short weeks. There was a race for business owners to apply as soon as possible. In late April, the program’s funds were replenished by Congress. While many small businesses clamored early on to secure funding, the second round of funding still has money to be lent out. If you did not apply for a PPP loan initially because you felt the requirements were too limiting, it may be wise to reexamine other loan options thru the Small Business Administration to apply for a loan at this time. Other loans are Economic Injury Disaster Loan (EIDL), SBAExpress Bridge Loans, and other debt relief options.