Paycheck Protection Program Reopens With Updated Rules
The second round of the Paycheck Protection Program is now in full swing, earmarked to provide some relief to small business owners across the United States.
The Small Business Administration and the U.S. Department of the Treasury have officially reopened the Paycheck Protection Program (PPP) to provide key relief to small businesses and their employees.
This second round of the PPP is part of the coronavirus relief bill passed last December. It comes with a set of updated rules and regulations meant to ensure this financial aid is not used illicitly and reaches the people and institutions who truly need it.
The PPP officially reopened on January 11 for new borrowers and on January 13 for certain existing borrowers. For now, only community financial institutions may initiate PPP loan applications, which should help place small businesses at the front of the line for this round of assistance.
Other key updates to the Paycheck Protection Program highlighted in the Treasury Department’s press release include:
- Borrowers can set their PPP loan’s covered period to be any length between eight and 24 weeks to best meet their business needs;
- PPP loans will cover additional expenses, including operations expenditures, property damage costs, supplier costs and worker protection expenditures;
- The PPP provides greater flexibility for seasonal employees;
- Certain existing PPP borrowers can request to modify their First Draw PPP Loan amount.
The new rules also allow businesses who took out loans in the previous PPP to apply for a second loan if they:
- Previously received a First Draw PPP Loan and will or have used the full amount only for authorized uses;
- Have no more than 300 employees;
- Can demonstrate at least a 25 percent reduction in gross receipts between comparable quarters in 2019 and 2020.
The small business loans taken on through the PPP are forgivable if the borrower meets criteria set by the Small Business Administration (SBA). They carry an interest rate of one percent and require no fees or collateral. At least 60 percent of the loan must be spent on payroll, while the rest may go toward eligible operating expenses.
“This updated guidance enhances the PPP’s targeted relief to small businesses most impacted by COVID-19,” says Treasury Secretary Steven Mnuchin. “We are committed to implementing this round of PPP quickly to continue supporting American small businesses and their workers.”