The Biden the administration announced several changes to the paycheck protection program this week, more strictly limiting small enterprises are eligible to receive forgivable loans through the federal bailout fund.
Starting Wednesday, businesses with fewer than 20 employees will have an exclusive two-week deadline to apply for loans. Large businesses will be excluded from the program during this time, as part of an effort to ensure that the hardest hit businesses can get the help they need.
“We will make sure every dollar is well spent,” President Biden said on Monday at an event announcing the program changes. “These changes will provide much needed and long overdue help to small businesses that desperately need help staying open, maintaining jobs and making ends meet.”
Congress created the rescue fund at the start of the pandemic with the passage of the CARES law in March. Lawmakers authorized an additional $ 284 billion in December to provide a second round of small business forgivable loans, bringing the total value of program funding to $ 806 billion.
Over the course of about four months in 2020, the PPP distributed about $ 525 billion in forgivable loans to 5.2 million businesses, saving about 50 million jobs, according to the SBA. The program was closed to new applicants at the end of July with around $ 38 billion remaining in the fund.
The program is expected to close to all borrowers on March 31.
Here’s what you need to know about the program and the latest rule changes passed by the Biden administration:
Which companies are eligible?
The program will be limited to businesses with fewer than 20 employees starting Wednesday, February 24 at 9 a.m.ET. The new rule aims to ensure that the country’s smallest businesses receive the aid.
An administration official told reporters in a call on Sunday that while the program “brought urgent help to many businesses across the country” last year, the first round “left too many businesses behind. owned by minorities and moms and pop when they were bigger, well – the connected businesses got the funds fast. “
Once the 14 days have passed, the original eligibility criteria will resume: any business with fewer than 500 employees can apply for a first loan, and any business that has already received a PPP loan can apply for a second if it employs less than 300. employees. .
What period do the loans cover?
Companies can choose to spend the funds over a period of 8 to 24 weeks. At least 60% of the money must be spent to maintain the payroll in order to receive a full pardon.
The interest rate is always 1%.
If I have already received a PPP loan, can I apply for a second one?
Businesses with 300 or fewer employees are eligible for a second loan, which will be capped at $ 2 million. Borrowers looking for a second forgivable loan must also prove that they saw their gross receipts drop by 25% in one quarter in 2020 compared to the same quarter in 2019.
How much money can my business receive through the program?
First-time borrowers are eligible to receive up to $ 10 million, while second-draw loans are capped at $ 2 million.
The amount of funding is calculated on the basis of the payroll for the past year. Borrowers can choose to use 2019 or 2020 payroll figures in their loan amount calculations.
What are the conditions for forgiveness?
Companies are still required to devote at least 60% of the loan to payroll maintenance so that the federal government essentially turns the loan into a subsidy. The remaining 40% can be used for other eligible costs, including mortgage expenses, rent, and utility payments.
The $ 900 billion relief plan that Congress passed in December also expands out-of-pocket expenses to include personal protective equipment and other equipment for worker safety, supplier costs; operating expenses and the costs of property damage related to “public unrest” in 2020.