What You Need to Know about Applying for a PPP Loan

Relief is once again on the horizon. The Consolidated Appropriations Act of 2021 (CAA), signed into law on December 27, 2020, approved a third round of the Paid Protection Program (PPP), which includes $284 billion in relief for small businesses.

Whether you are applying for the first time or you are looking at another round of relief, there are some things you should know about where to apply for a PPP Loan. We’ll go over the conditions and guidelines during this third round of funding to help you navigate this process successfully.

Where Is the Best Place to Apply for a PPP Loan?

Banks are often your best bet when it comes to seeking PPP Loans, but other lenders trusted by the U.S. Small Business Association (SBA) are also viable options.

If you want a relatively easy and fast way to apply for a PPP Loan, you should consider applying through your current bank. Loans require a significant amount of time to complete background and identity checks. Working with a familiar bank will expedite the background check process.

Even if you’ve previously applied for a PPP Loan through your bank, there’s nothing wrong with applying again. As long as you’ve operated within the guidelines of the last loan, your bank or another lender likely won’t have a problem with lending to you during this third round of funding.

Which Banks Accept PPP Applications?

Many banks are accepting third-round PPP applications. This includes most national banks like Wells Fargo and JP Morgan Chase and even some regional banks. For example, in Utah, Zions Bank and Rock Canyon Bank currently accept new applicants.

To find out which banks and other lenders are eligible to make PPP Loans, visit the U.S. SBA Lender Match website.

Where Do I Apply for a PPP Loan Online?

If a bank or other lending agent accepts online applications, they will usually inform you of this option on their website. Some lenders won’t give you the option to apply for PPP Loans on their website. Instead, they may require you to fill out an external application form. If that’s the case, you can easily find those forms at the following links to the SBA website:

Who Qualifies for PPP Loans?

PPP Loans are specifically designed with small businesses in mind. To officially qualify, your business must meet certain requirements. If this is your first PPP Loan, you will be eligible if your business meets any of the following criteria:

Your business was operational before February 15, 2020
Your business is still open
You have fewer than 500 employees (or no more than 500 per location if you have multiple places of business)

Can You Get a Second PPP Loan?

The CAA provides two types of PPP Loans during this round: first-draw and second-draw. Simply put, first-draw applicants have never received a PPP Loan, while second-draw are those who received a loan during the last two rounds of funding. So even if you already received a PPP Loan from one of the first two rounds of funding, you can get a second loan

The amount you receive in your second PPP Loan will be substantially less than your first loan. First-draw loans are for companies that have yet to receive any PPP assistance. These companies may receive up to $10 million. Companies that have already received a PPP Loan are limited to an additional $2 million.

If you wish to apply for a second-draw PPP Loan, your business must meet the following criteria:

You have used all of your first PPP Loan
Your business was operational before February 15, 2020
Your business is still open
You have fewer than 300 employees (or no more than 300 per location if you have multiple places of business)
Your business saw a 25% or greater decrease in gross revenue in 2020 (when compared to 2019)

What Disqualifies Businesses from PPP Loan Eligibility?

There are certain variables that will disqualify your business from PPP Loan eligibility:

Your business is publicly traded
Your business is owned by China by more than 20%
Your business is a hedge fund or private equity firm
Your business, or another business that you owned, has defaulted on a loan from the SBA or any other federal agency
You or your business are bankrupt or in bankruptcy proceedings
You or a close relative are a key employee for the lender with which you applied for a loan
An owner of 20% or more of the company has been incarcerated, on probation, on parole, or convicted of a felony within the last year

When Is the Deadline to Submit a PPP Loan Application?

The PPP Loan application deadline is March 31st, but access to funding may run out sooner if federal funds are depleted. This applies to both first- and second-draw applications.

What Are the Guidelines for Using the PPP Loan?

The CAA has placed certain restrictions on how you can use the PPP Loan. For example, the majority of your loan (60%) must be used to cover payroll expenses. Other approved uses of the loan include coverage of:

Rent, mortgage interest, and utilities at your place of business
Operations expenses, such as business software, cloud computing services, product/service delivery, supply tracking, payroll processing, etc.
Property damage costs that are not covered by insurance policies
Supplier costs that are essential to business operations
Worker protection expenses, including any expenditures required for compliance with the CDC, OSHA, HHS, or any other state or local government

Can You Seek Loan Forgiveness?

The PPP Loan is unique—if you follow all of the guidelines listed above, then you can seek forgiveness on your PPP Loan. But if you fail to comply with even one of the guidelines, you will have to pay the loan back in installments.

There are two different loan forgiveness applications you can fill out. The first is the Paycheck Protection Program Loan Forgiveness Application. Your business will likely use this one.

The second application is the Paycheck Protection Program EZ Loan Forgiveness Application. This form was introduced during the second round of PPP funding and is half the length of the previous application. You can apply for loan forgiveness with the EZ application only if your business meets at least one of the following criteria:

You are a self-employed individual, independent contractor, or sole proprietor who had no employees at the time you submitted the PPP Loan application
You did not reduce the annual salary of any employee by more than 25% during their covered period when compared to the first quarter of 2020 (January 1 – March 31)

In these cases, the term “employees” refers to individuals who did not receive wages or a salary of more than $100,000 a year during 2019.

Balance Your Budget with Amplēo

If you want assurance that you will stay within the parameters of the PPP Loan guidelines, you must balance your budget and ensure financial accuracy. A solid budget will help you determine exactly how much assistance you need to request and where you will apply the funds you receive. Consider hiring a financial expert to help you if you’re feeling overwhelmed. Our financial experts offer a full range of financial services, including CFOs, accountants, bookkeepers, and controllers. If you want to ensure that you can apply for PPP Loan forgiveness, call Amplēo today to get your budget in order.