Small business owner

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Paycheck Protection Program applications will be open only to the smallest businesses for the next two weeks, part of several changes to the program the Biden administration announced on Monday. 

Starting Wednesday, applications will only be open to firms with 20 or fewer employees for 14 days. The loan calculation for sole proprietors, independent contractors, and the self-employed will be modified to offer more relief. There will also be $1 billion in PPP loans set aside for these types of businesses.

The Biden administration also plans to remove restrictions that, until now, have prevented business owners with non-fraud felony convictions and those who have been delinquent on federal student loans from receiving PPP loans.  

“The SBA has learned quite a bit since the first round and should bring more clarity to the process this time,” Greg Ott, the CEO of Nav, told Insider by email. “A larger group of participating lenders in round two will also be beneficial for a smoother rollout.”

While the stimulus package will save some businesses, it’s arriving too late for others. Yelp estimated in September that nearly 100,000 businesses had permanently closed since the start of the pandemic.

“A lot of small businesses have shuttered, and this loan isn’t going to reopen them,” said Henrietta Treyz, the director of economic policy at the investment research firm Veda Partners.

Here’s what small-business owners need to know.

Changes to eligibility

The new stimulus package includes several changes to eligibility for PPP loans.

Eligible entities now include businesses, some nonprofit organizations, veterans’ organizations, tribal businesses, housing cooperatives, self-employed individuals, sole proprietors, independent contractors, news organizations, and small agricultural cooperatives.

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“This eligibility approach is much more targeted at small businesses compared to round one — which saw many large public companies participate,” Ott said. “Hopefully this means more smaller businesses who are in dire need will get the money they need to survive.”

Nonprofit organizations that want to apply for a second PPP loan must have 300 employees or fewer and cannot be professional sports leagues or organizations that promote or participate in political activities. The new package also includes rules for organizations that participate in lobbying activities or receive receipts from lobbying.

Businesses or organizations that were not yet open on February 15, 2020 and publicly traded companies are not eligible to apply for a PPP loan.

Previous PPP borrowers can apply for the second draw as long as they have 300 or fewer employees and can demonstrate at least a 25% reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same period in 2019. There are alternative calculations for seasonal businesses and businesses started after 2019.

The original PPP stipulated that eligible entities could have up to 500 employees, and it had no requirement to show losses — meaning that in this new round, lawmakers are aiming to help smaller businesses along with companies hit hardest by the pandemic.

Most borrowers can receive up to 2.5 times their average monthly payroll costs, but those in the accommodation or food-services sectors can receive …read more

Source:: Business Insider

      

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