On December 22, 2020 Congress passed the stimulus bill which provides for new Paycheck Protection Program loans and other small business relief. Read more about that legislation and apply for a PPP loan here.
On the morning of June 30, 2020 I received an email with an urgent question, “Is it too late to apply for a Paycheck Protection Program (PPP) loan?” At that moment, it was too late. That was the last date to get an approval number from the SBA and lenders had stopped taking applications in anticipation of that looming deadlines.
But less than 24 hours later that changed.
The House and Senate voted to extend the program until Aug. 8, 2020 and the President has signed it into law.
If you have been debating whether to take a PPP loan for your business, this gives you more time to collect documents, consider your options and apply if you believe it makes sense for your business. Approximately $130 billion in funds are still available to lend to small businesses.
As a reminder, PPP loans are a type of SBA 7(a) loan created by The CARES Act. Small businesses may receive a loan of 2.5 times average monthly payroll. Self-employed individuals, including independent contractors, can apply based on 2019 Schedule C net profit. The loan may be fully forgiven if the borrower spends the money properly. Broadly that means 60% or more must go toward payroll and up to 40% for other expenses such as utilities, mortgage interest and/or rent.
For many business owners, PPP has been a lifeline that has allowed them to pay employees (and themselves) and cover some essential bills during the downturn.
The recent PPP Flexibility Act made some substantial improvements to the program, dropping the threshold for spending on payroll from 75% to 60%, for example, and extending the time to rehire employees and avoid a reduction in forgiveness.
There are still many business owners and independent contractors who haven’t applied for or received PPP loans. For some, their business didn’t slow down until recently, making them unsure whether they would qualify. Others hadn’t completed their 2019 business tax returns and couldn’t figure out how to calculate how much they qualified for. And with news that some businesses were returning PPP loans, some were wary about applying themselves.
If you’ve considered applying for a Paycheck Protection Program loan, this may be your last chance. The good news for borrowers who apply now is that there is much more extensive guidance available than when the program first launched.
The following resources can help you understand how they work:
- Frequently Asked Questions About CARES Act Paycheck Protection Loans for Small Business
- Nav CARES Act SBA Loan Calculator
- Self-Employed: How To Apply For A Payroll Protection Program PPP Loan
- 7 Ways the Paycheck Protection Program Flexibility Act Can Help Your Business
Many lenders and big banks have stopped accepting new applications from small businesses and independent contractors. However, there are lenders that will continue to process and approve PPP applications. Nav will help connect small business owners to PPP paths by matching them to a PPP lender or agent.
This article was originally written on July 2, 2020 and updated on January 11, 2021.