PPP loans: millions of business owners looking for help
The Small Business Administration and the Treasury Department are relaunching the Paycheck Protection Program five months after the end of its first two funding cycles.
NEW YORK – For Nancy Sinoway, a second coronavirus relief loan would increase her sewing business’s chances of survival.
“I could use it for marketing, for new samples. I could use it as a lifeline, ”says Sinoway, who designs and manufactures dresses for occasions like weddings and proms. It was inundated with order cancellations from early March as the virus spread and large gatherings and events were abandoned.
Sinoway obtained a Paycheck Protection Program loan last May and used it to pay his three employees. But the loan money was well below what she needed to maintain her store in Port Washington, New York. She was forced to shut it down and move the business to her home.
Millions of business owners like Sinoway are on the verge of getting help. The Small Business Administration and the Treasury Department are preparing to relaunch the PPP five months after the end of its first two rounds of funding.
In the latest cycle, businesses that received loans last year will be able to borrow up to $ 2 million as long as they have no more than 300 employees and experience a 25% drop in revenue or more. quarterly. First-time borrowers with no more than 500 workers will be able to borrow up to $ 10 million.
RELATED: Payment Status “Not Available” on IRS Tracking? Sorry, your dunning check did not come
RELATED: $ 600 Stimulus: What To Do If Payment Isn’t Received Or Is Below Expectations
The loans, which can be canceled, will have a term of five years and carry an interest rate of 1%.
The SBA will initially only accept applications submitted by Community Financial Institutions, or CFIs, lenders whose clients are minority-owned and economically disadvantaged businesses. As of Monday, first borrower applications submitted by these lenders will be accepted, and second loan applications on Wednesday. The SBA has said it will begin accepting applications from all of its lenders within days of this initial CFI period.
As with the first two cycles of the PPP, applications must be submitted online to banks and other SBA-approved lenders. All requests must be submitted and approved by March 31st. Loan amounts are calculated from the salary expenses of a business; companies can use their 2019 or 2020 payroll to calculate how much they can claim.
Businesses will have 24 weeks from the date they receive a loan to use the money. While 60% of the proceeds must be used for payroll for loans to be canceled, businesses can use the remainder for employee health benefits, mortgage interest, rent, utilities, and expenses essential to business operations. .
The PPP is relaunched under the coronavirus relief bill approved by Congress in late December, providing for $ 284 billion in new loans. The first two rounds, which began on April 3 and ended on August 8, granted more than 5.2 million loans worth $ 525 billion.
But for many businesses, including restaurants, gyms and retailers that depend on people gathering in large numbers or near, the money was nowhere near enough as the pandemic continued for longer than expected. It is estimated that more than 100,000 small American businesses have gone bankrupt since the start of the epidemic.
Additionally, many businesses were unable to obtain loans, including newly established businesses and those with financial records that did not meet banking requirements. Many businesses turned to multiple banks, often because they couldn’t get their inquiries and subsequent inquiries answered – and many of these business owners gave up in frustration or ran out of business. time.
Jason Tyler expects his limo service business to drop in half this month. The business trips that provided up to 80% of his income remain on hold, and without weddings and concerts, individual clients have little need for a limousine. Tyler needs a second PPP loan to keep his business going.
“We’re going to use it to pay our staff and honestly I have to use it for marketing dollars,” says Tyler, owner of Prestige Transportation, which serves the Kansas City metro area. With his regular clients staying at home, he needs to find new accounts to keep his income stable.
He used his first loan to pay the people who drive his seven cars, but there was one worker he couldn’t afford to hire again. Tyler also sold one of his cars to provide much needed capital. Tyler hopes business will start to return to normal in the spring, when more people will hopefully have been vaccinated.
Some homeowners, although in difficulty, do not rush to apply for a second loan. Jim Sheets, who owns a framing store and art gallery in Rochester, New York, wants to see how much of his first loan will be canceled before deciding on a second round.
The sheet store, Frame Shop of Henrietta, was closed for three months in the spring and lost the business it usually gets from schools such as the Rochester Institute of Technology and the University of Rochester. But homeowners’ affairs keep Sheets afloat – people who spend more time at home get framed photos to spruce up their surroundings.
The PPP loan Sheets got in the spring helped him cope. He would consider another loan, but his request will depend not only on having to pay back the money from the first one, but also on whether the sales momentum continues in his store.
“At this point, I hope I don’t need it,” he says.
RELATED: Minority-Owned Businesses Waited Months for Loans, Data Shows
RELATED: Federal Checks Otherwise Save Terrible 2020 For American Farms
RELATED: Huge COVID-19 Highlights, Government Funding Law Comes Into Force