Here’s What’s New in U.S. Small Business Pandemic Paycheck Protection Program

Here’s What’s New in U.S. Small Business Pandemic Paycheck Protection Program

2021-01-11 13:50:23

The Small Business Administration is launching more Paycheck Protection Program loans on Monday to help small businesses weather the coronavirus pandemic. Congress last month approved $ 284 billion in new funds to forgive loans distributed by lenders on behalf of the government, adding to the $ 525 billion disbursed last year.

The rules and process have been adjusted this round, partly to address issues that surfaced last year and partly to ensure that the program meets the needs of the economy. Here are some important changes:


Some small businesses can apply for a second PPP loan of up to $ 2 million. Eligible second borrowers must have no more than 300 employees and have already issued or plan to spend their first PPP loan on eligible expenses, such as wages and rent. Businesses will also have to demonstrate that they have been hit by the pandemic, with a loss of at least 25% in gross revenues for each quarter in 2020 compared to the same quarter in 2019.


Businesses will be able to use PPP funds for eight to 24 weeks, a more flexible and clear-cut window than under previous loans. Some companies felt pressured or struggled to spend their PPP funds so quickly, and many preferred to hold on to funds until it was really needed.


PPS borrowers must spend 60% of the loan on the payroll, as legislators primarily intended the program to keep Americans in work. However, the program now allows the remaining 40% to be spent on a wider range of expenses. That includes protective gear for employees, costs associated with building outdoor dining areas and repairing property damage – a nod to companies that may have suffered damage during widespread protests against racial justice in the summer.


The program also includes a drastically streamlined process for obtaining forgiveness. For loans under $ 150,000, borrowers can simply sign and submit a short form stating that the money was spent as required to forgive the loan. Banks had warned that the previously required receipts and documents were too heavy for smaller borrowers, making it difficult to process the millions of requests for forgiveness.


After the program was criticized last year for allowing fraudsters and large companies to get cash, the SBA is introducing new safeguards. Previously, the SBA automatically approved loans that met the basic criteria, but this time it will automatically perform identity management and data verification checks to ensure that the money goes to legitimate businesses.

That could delay the approval process by at least a day, but given that officials say they expect the funds to meet business demand, that delay shouldn't cause companies to miss out completely.

(Reported by Pete Schroeder; edited by Michelle Price and Cynthia Osterman)

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