PPP Loans Round 2 Now Open: How to Apply

The U.S. Treasury on Monday swung the doors open on $284 billion in Paycheck Protection Program (PPP) loans for small businesses struggling during the pandemic, and the race to apply has already begun.

The first round of PPP loans , which had $522 billion in funding behind it, evaporated in just months, so it’s important to understand and apply for these loans as fast as possible.

PPP loans are forgivable loans, meaning the money doesn’t need to be repaid if it meets the criteria laid out by the Small Business Administration. They have an interest rate of one percent and the current batch will mature in five years. The loans require no collateral and come without fees.

Borrowers must spend at least 60% of the loans on payroll, with the other 40% going to other eligible operating expenses.

Already, businesses that borrowed in round one of the PPP loans have seen their loans forgiven.

The PPP loans in April met with intense scrutiny as big businesses swooped up millions of dollars and minority-owned businesses went underserved . Also, guidance on how borrowers will get taxed on the loans has been cleared up.

This time, to prioritize smaller businesses in need, businesses that did not receive a PPP loan before will be eligible for the loans first. Loans max out at $2 million, rather than the old cap of $10 million.

• Any small business that meets SBA’s size standards (either the industry based sized standard or the alternative size standard)

• Sole proprietors, independent contractors, and self-employed persons

• Any business with a NAICS Code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location

• Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or Tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of: 500 employees, or that meets the SBA industry size standard if more than 500

• Importantly, businesses that did not receive a PPP loan in the first round will have first access to the loans. Also, the businesses will have to show a 25% drop in revenue from any 2020 quarter to any 2019 quarter.

The SBA provides a lender match portal, where borrowers can complete a brief questionnaire and then get matched with an approved lender within two days. The SBA will initially only lend through smaller community financial institutions before opening the loans up to all lenders.

Importantly, these loans have helped businesses in the franchising space retain employees and keep them from filing unemployment claims.