Mark Pestronk
Q: I have heard that my agency can get a new Paycheck Protection Program (PPP) loan. When can I get it? How much can it be? What are the forgiveness requirements? What are the other details that I need to know?
A: The Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act, signed by the President on Dec. 27, has $259 billion for new PPP loans, with $25 billion of that set aside for companies with no more than 10 employees or located in low- to moderate-income neighborhoods. If you already received a PPP loan, you can apply again, as long as you certify that you have used all of the first loan.
The maximum amount you can get is the same as last time: up to 2.5 times your average monthly payroll in 2019, up to $2 million. Self-employed people and one-owner companies with no employees continue to be limited to $20,833.
If you get a new loan, it will probably last longer than it did in the spring, since payrolls are already so far below what they were in 2019. You can have up to 24 weeks to spend it all. You can then have up to 10 months to apply for forgiveness.
You must have no more 300 employees (down from 500 previously). A new wrinkle is that you must demonstrate at least a 25 percent reduction in gross receipts during any quarter of 2020 compared with the same quarter in 2019, or a 25% annual reduction. For travel companies of all kinds, that will be easy to prove.
The other new wrinkle is that you can spend the money on more kinds of expenses and still qualify for forgiveness. In addition to payroll, rent, mortgage interest and utilities, you can now spend the loan on other operational expenses including software, some vendor costs required by contracts and worker protection expenses and other Covid-19 adaptive costs, such as the cost of reconfiguring your office for social distancing.
If your loan is not 100% forgiven, the repayment terms include non-compounding 1% interest with five years to pay, with no personal guaranty.
The new law required the Small Business Administration (SBA) to issue new regulations within 10 days after the law took effect, and the SBA just met the deadline. You can review the 42-page document here.
Potential borrowers and lenders will no doubt have hundreds of questions, so we can expect the SBA to issue an FAQ document in the next week or two.
Banks and other lenders will probably want to wait until then before accepting new PPP applications, so it will probably be a few weeks before you can apply for a new loan. You don't need to go to the same lender you used for the first loan.
The last day to apply for and receive a new PPP loan is March 31, but if history is any guide, the funds will be exhausted before then, so apply as soon as you can.