PPP reopens Tuesday for more loans, including second round

WASHINGTON – In a December Capitol Region Chamber of Commerce survey, local businesses overwhelmingly said “cash” was their greatest immediate need to weather the pandemic. With the restart of the paycheck protection program, much-needed funds will now be available for many of these businesses.

The Small Business Administration reopened the popular PPP loan program last week, allowing more businesses to get a forgivable loan for the first time and some hard-hit businesses to apply for a second loan.

All lenders will resume offering PPP loans on Tuesday, the SBA said. Last week, small lenders, community development financial institutions, and minority deposit-taking institutions began offering loans to some borrowers first.

PPP loans are loans of up to $ 10 million for businesses with fewer than 500 employees that can be canceled if the businesses use most of the money to cover payroll and keep employees on staff.

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After Congress passed a new coronavirus relief bill in December, the SBA got more money to offer the original PPP loans and give second-round loans to companies with declining revenues. significantly during the pandemic.

Now, companies with fewer than 300 employees and which have demonstrated a decrease in revenue of at least 25% in a quarter of 2020 compared to 2019 can get a second, smaller PPP loan.

“Given that this is a quarter of the year, very few companies do not qualify based on this requirement,” said Mark Eagan, President and CEO of the Capitol Region Chamber. “The businesses that are facing consumers – who depend on the people who come to their door, whether it be retail operations, restaurants – those that are facing consumers obviously have the greatest impact because even right now, it’s not back to business as usual. “

In the Capitol region, 20 percent of businesses surveyed said their revenues were down more than 50 percent in December, while 28 percent said revenues were down 30 percent or more. Twenty-two percent said they were unsure whether they were at risk of closing and 11 percent said they were at risk of closing soon.

These second-draw loans are capped at $ 2 million. Businesses working in food services and accommodation businesses can get larger loans than businesses that don’t.

As of August 8, the program’s closing date, the SBA had granted 5.2 million first-round PPP loans, including 348,870 in New York., SBA data shows.

The new law makes some key changes to how the original PPP loans can be used (and still canceled) and who can get them now that applications have reopened. This increases the review of loan applications.

The law makes another big change that the National Small Business Association has lobbied for: it allows businesses to deduct from their taxes the business expenses paid by their PPP loan, thus reinforcing the intention of Congress that the PPP is a loan. tax-free, explained Molly Day, NSBA vice president of public affairs.

The law allows people to use their PPP loan to pay for software, accounting needs, personal protective equipment, and even property damage caused by “public unrest” in 2020.

“There are a lot of other expenses that employers have beyond payroll,” Eagan said. “This original program (for which the required funds must be used) was almost entirely devoted to payroll. I think the expanded definition was appropriate.”

The law specifies that businesses that were not in business on February 15, 2020 – before the pandemic – are not eligible for loans.

It excludes listed companies from PPP eligibility. More than 125 companies with publicly traded stocks, including at least 16 in New York City, have been approved for PPP loans. Some decided to return the money in the spring after a public outcry.

The law makes housing co-ops, destination marketing organizations, 501 (c) 6 organizations and news agencies eligible for PPP loans.

It requires the president, vice president, members of Congress and heads of government agencies to publicly disclose whether they or their spouses obtained a P3 when the loan was canceled. Businesses linked to at least 12 members of Congress have received loans, according to Fortune.

The law also requires the SBA to submit to government loan oversight and regularly testify about the program to Congress.

“I think there are going to be more SBA staff members eyes on these loans,” Day said. “It’s just in response to the fraud problem.”

The SBA Inspector General reported in October that tens of thousands of businesses had received PPP loans for which they appeared not to have been eligible, such as those created after the start of the pandemic or businesses that exceeded workforce size limits. The Ministry of Justice indicted seven people in a scheme to fraudulently obtain $ 16 million in PPP loans in November.

Some people who received first round PPP loans are now asking for loan forgiveness through their lenders and the SBA. The loan cancellation began in October, Eagan said.

President-elect Joe Biden, who will be inaugurated on Wednesday, said last week that he wanted to include more relief for small businesses in another COVID-19 relief bill that he is asking Congress to pass in the next weeks. Biden wants $ 15 billion to provide flexible grants to small businesses. He also wants $ 35 billion to provide low-interest loans and venture capital to entrepreneurs.

Biden is likely to need bipartisan support for this legislation, which will likely make certain elements and the overall price of his $ 1.9 trillion US bailout difficult to pass through Congress.

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