PPP Loans: Your Questions Answered About Government Funds for Small Businesses

Back in April, we answered your most pressing questions about the Paycheck Protection Program (PPP) for small businesses. Since then, small businesses carried on, dealing with new rounds of shelter-in-place orders, adapting and readapting their workforce, and throughout, relying heavily on digital tools. Now, after nine months, the PPP has launched again to help these businesses stay afloat since COVID.

The Second Draw PPP loan is different from its first version, however. We sat down with Justin Ridgely, senior director of finance at Fundera — a financial services organization matching small business owners to loans — to hear the latest PPP loan update.

1. How is this PPP loan update different from the first round? What does it mean for small businesses who didn’t initially receive funds? 

The primary difference with the PPP loan update is that it not only offers first-time loans to eligible businesses but also second-time loans to eligible businesses that received and used their first PPP loan last year. The bill authorizes $147 billion for first-time loans, and $137 billion for second-time loans (“second draw”). This means businesses that did not receive a PPP loan last year have another opportunity to receive funding and should evaluate its needs and eligibility.

2. If a small business was denied the first round of PPP, should it reapply? 

Businesses who were denied in the first round due to ineligibility should consult the new rules and see if the new expanded rules allow it to receive a loan. Certain business types, such as housing cooperatives, broadcast news organizations, and 501(c)(6) organizations, are now eligible, and businesses now eligible to apply should do so. I would suggest that all small businesses who were denied due to eligibility, or returned a loan, should revisit the rules and consider applying again.

3. Are there new requirements on what the new round of PPP can be used for?

Yes, the list of forgivable expenses has been expanded to include several useful categories such as operations expenditures, property damage costs, supplier costs, and worker protection expenditures. This expansion should make it even easier for businesses to eventually get an entire loan balance forgiven.

4. Who qualifies for the new round of PPP? If a small business received funding from the first PPP, can they apply for this second round?

Businesses that did not apply under the first program may be eligible to apply now for first draw loans, while businesses that received and used loans under the 2020 PPP program may be eligible for second draw loans. The new second draw program targets smaller, significantly impacted businesses that can demonstrate a 25% or greater revenue loss in 2020 and have under 300 employees. For the second draw, a business does not need to have its first loan forgiven but it is mandatory that the whole loan was used.

5. How much money can small businesses ask for?

For both first and second draw loans, most businesses can receive a loan for 2.5x its average monthly payroll calculated for 2019 or the trailing twelve-month period. Additionally, for second draw only, accommodation and food services businesses (NAICS code 72) were granted a larger 3.5x multiplier. For example, a restaurant with average monthly payroll of $20,000 could receive either a $50,000 first draw loan (2.5x) or a $70,000 second draw loan (3.5x).

6. How can small businesses apply for the new round of PPP?

As with the first PPP program last year, all PPP loans are administered via participating banks and not by the SBA directly. Businesses can apply through any participating bank, typically via an online application. For businesses applying for a second draw loan, it may be easier to work with the same bank that disbursed its first loan to make the process easier. If you’re looking for a quick and easy way to apply, Fundera can also help.

7. How can small businesses increase their chances in getting PPP round 2 funds?

The main thing you can do to increase your chances of receiving funds, and receiving them quickly, is to have a strong application. This means filling out the forms correctly, getting your calculations right, and providing clear supporting documentation where necessary. If your application is accurate and includes adequate supporting documentation, there should be nothing to stop a small business from getting a PPP loan if it is eligible.

8. When will the new PPP round funds become available?

The new PPP program is currently open to all eligible businesses, and after a tiered rollout, is open to all banks. On Tuesday, January 19, the SBA announced that it had already approved over 60,000 PPP loan applications submitted by nearly 3,000 lenders, for over $5 billion in loans. With $284 billion allocated to the program there is still plenty of money left. If you have more questions about the program please refer to the SBA’s PPP hub.

9. What other funding resources are available for small businesses?

In addition to PPP, there are multiple other types of funding to consider if you’re not eligible for PPP or have different needs. The recent bill refreshed the Economic Injury Disaster Loan (EIDL) program with $20 billion in additional funding and provided $15 billion for Shuttered Venue Operators Grants (also known as Save our Stages or SOS grants). Additionally, the SBA 7a program was expanded in the recent bill and there are other types of small business loans that might be available.

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