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The Paycheck Protection Program (PPP) is opening back up for small business owners in need of financial relief during the pandemic.

The Small Business Association (SBA) first opened applications through community lenders earlier this week and will open applications through small lenders with $1 billion or less in assets on Friday, January 15. Applications through all other lenders will open on Tuesday, January 19. 

Businesses hoping to receive PPP loans this time around will need to pay careful attention to new eligibility and forgiveness requirements. Experts say guidance is clearer this time, as legislators have worked out many of the kinks of the CARES Act, but the language is more complex. 

We’ve broken down five major changes you need to know before you apply for PPP loans. 

1. Only firms with 300 or fewer employees are eligible for a second loan

During the first round of stimulus in April, several large companies and franchises received backlash for taking PPP loans. Many small-business owners were concerned large, revenue-generating companies received aid that was meant for them.

In this second stimulus bill, legislators narrowed down who qualifies in an effort to address this issue. If your business didn’t receive a loan in the first round, you’ll follow the same guidance that you must have 500 or fewer employees. If you’re applying for a second PPP loan, your company must have 300 or fewer employees. 

Your business must have been in operation as of February 15, 2020 to be eligible for PPP loans. Sole proprietors may apply using their salary or earnings capped at $100,000 per year, to calculate payroll cost.  

Additionally, publicly-traded companies are not eligible for a first or second loan.

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2. Non-profits and news organizations are now eligible

This round added several business classifications not included in the CARES Act. 

Eligible businesses now include:

small businesses with 300 or fewer employees
non-profit organizations with 300 or fewer employees
veterans’ organizations
tribal businesses
housing cooperatives
self-employed individuals
sole proprietors
independent contractors
news organizations
and small agricultural co-operatives

3. You must demonstrate at least a 25% loss in revenue

Eligible businesses applying for a second loan must demonstrate at least a 25% reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same time period in 2019. There are alternative calculations for seasonal businesses and businesses started after 2019.

Read more: Lawyers, accountants, and lenders answer your relief loan questions, including how to demonstrate revenue

4. Food service and accommodation businesses can borrow larger loans

Businesses in the food services or accommodation industries, hit especially hard by government-mandated shutdowns, will be able to borrow larger loans. The new round of PPP allows these companies to receive up to 3.5 times their average monthly payroll costs instead of the typical 2.5 times.

To determine if you’re eligible, your business must have a NAICS code beginning in 72. 

5. Improved access for women- and minority-led businesses

Another problem with the CARES Act was the limited amount of funds given to female- and minority-owned businesses, which further highlighted long-standing inequality in banking. One survey found that just …read more

Source:: Business Insider


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