If you haven’t applied for a Paycheck Protection Program (PPP) loan yet, we have good news: You haven’t missed the boat. On Saturday, July 4th, President Trump signed legislation that extends the PPP application deadline to August 8th.
Here are a few things business owners should know about this new development.
What is the Paycheck Protection Program?
Congress created the PPP as part of the Coronavirus Aid, Relief and Economic Security Act (CARES Act) to provide federal assistance for small businesses and other qualifying entities impacted by COVID-19. The PPP provides forgivable loans of up to $10 million per borrower that can be used for payroll, rent, and other costs.
All or part of a PPP loan can be forgiven as long as the expenditures meet certain criteria. Otherwise, a PPP loan has an interest rate of 1% and a maturity of 2 or 5 years, depending on when it was issued. Regardless, loan payments are deferred for up to 10 months after the end of the covered period. PPP applicants do not have to provide collateral or personal guarantees, nor are they subject to loan fees.
Why was the PPP application deadline extended?
The original deadline to apply for a PPP loan was June 30th. However, when this date came and went, the allocated funds had not yet been depleted. With roughly $130 million of the fund’s $659 billion still untouched, Congress approved a five-week extension of the program, which President Trump signed into law on July 4th. Although the PPP halted applications when the June 30th deadline passed, application submissions resumed on Monday, July 6th.
Is your business eligible for a PPP loan?
Per the Small Business Administration (SBA), the following entities impacted by COVID-19 may be eligible for a PPP loan:
- Small businesses
- Sole proprietors
- Independent contractors
- Self-employed individuals
- Businesses that have a NAICS Code beginning with 72 (Accommodations and Food Services) and meet certain criteria
- Certain non-profit, Veteran, and Tribal organizations
Should you apply for a PPP loan?
Just because your business is eligible for a PPP loan doesn’t necessarily mean you should apply for one. There are several things to consider before doing so, including the rules for PPP loan forgiveness. Although Congress recently relaxed these rules, it’s important to be certain you truly need the loan before submitting an application as certifications from the borrower are required.
If you do decide to apply, you can do so through any existing SBA 7(a) lender or federally insured depository institution, as well as any participating federal insured credit union or Farm Credit System institution. Some other financial technology companies have been setup to accept and process PPP loans, although these are not recommended.
We’re here to help you navigate the PPP.
If you think your business could benefit from a PPP loan, now is the time to act—August 8th will be here before we know it. The first step is to weigh your options and determine if a PPP makes sense for you. As your trusted advisors, we are here to help you through this process and guide you in making the right call for your business. We can even connect you with a participating PPP lender in your area. To get started, contact the KHA team today.
For more information on the PPP, including a detailed list of entities that could be eligible for the program, visit the SBA PPP website.
These sources are simply included for informational purposes. KHA Accountants, PLLC, its partners and others do not provide any assurance as to the accuracy of these items or the information included therein. As such, KHA Accountants, PLLC cannot be held liable for any information derived from referenced sources. This by no means is a recommendation to obtain a loan or attempt to apply for a loan. There are many unknowns at this time regarding what other stimulus (grants or other loan options) may become available with pending and future bills, executive orders, or emergency declarations to follow, that may become laws. Consult your legal and business advisors prior to making financing decisions. This is intended for illustrative and discussion purposes only.