Summary List Placement
On Monday, the Small Business Administration announced that for two weeks starting Wednesday, February 24, it will limit applications to only those businesses with 20 or fewer employees. Typically the program is open to employers with up to 500 workers.
Last month the SBA reported that it has processed nearly 85% of the 1.3 million forgiveness applications for loans from the first round of the programs, delivering more then $100 billion so far.
Still, it has been more than ten months since applications originally opened for the Paycheck Protection Program, which means that for many borrowers, their original emergency relief funds have long since been spent.
Fortunately, the reauthorization of the program passed in December allows some borrowers to tap into the program for a second time.
Applications for first- and second-draw loans are open at all participating lenders, the SBA said this week.
The process for obtaining a second loan will require borrowers to meet a slightly narrower standard than first-timers, according to recent guidance from the Small Business Administration.
Below are some of the key limitations for prospective “second draw” borrowers.
Your original loan must be all used up
In order to be considered for a second PPP loan, you must show that you have used up the funds from the original one.
Not only that, but you will need to certify that the loan proceeds were spent “only for eligible expenses.”
In other words, don’t ask for more money if you used your first loan to buy a Tesla.
You need to still be in business and not in bankruptcy
This applies to first-time borrowers too, but unfortunately the slow pace of recovery means that for some PPP loan recipients, the original amounts weren’t enough to stay afloat.
If your business is closed permanently or in bankruptcy proceedings, you are not eligible to receive a second draw loan.
You must show actual revenue losses
If your revenue for any quarter of 2020 were down by 25% relative to the same quarter in 2019, you may be eligible for a second loan. Seasonal businesses must use the calendar quarters during which they were active, even if that does not align with their actual operating schedule.
Businesses that started between January 1 and February 15 of 2020 can compare the first quarter of 2020 to any other quarter of that year.
If you are down 25% for the whole year, that means you were definitely down at least that much for one of the quarters, and you’ll need to provide tax filings or bank statements to your lender to support your claims.
Also, do not include your first-draw funds when counting revenue.
You may not receive the Shuttered Venue grant
Theaters, museums, and other live performance venues are eligible for grants up to $10 million under a separate provision of the enhanced CARES Act. Businesses eligible for Shuttered Venue grants may receive up to 45% of their 2019 revenue, capped at $10 million and another payment in the spring of up to 50% of the first grant.
If your business receives one of those, …read more
Source:: Business Insider