It’s finally happening! The PPP loan is being expanded for 2021.
So if you are in a struggling small business and you need money so that you can survive for the next few months, then please take advantage of the Paycheck Protection Program otherwise known as the PPP loan.
It refers to a loan that if used for certain qualified expenses, can be forgiven thus being converted into a grant.
Now we’ve seen the headlines of small businesses that are dying and closing.
And we are close to situations because we have clients who have been affected as well.
That’s why in this post, we want to make sure everyone understands what they need to know about getting approved for the new PPP Loan.
Now when the PPP loan was announced back in April, it was supposed to cover small businesses for eight weeks.
And clearly for most small businesses this was not enough time. So we’ve been waiting for another round of PPP for quite some time.
Well we finally got it folks and things have changed a little bit this time around so we want to cover some of these changes and give you some tips on how you can secure the loan as fast as possible.
It is because these funds are limited and you want to make sure that you don’t miss out.
So we’ll share the exact lender that we used because the big banks were seemingly overwhelmed and slow with getting back to us.
Just a little disclaimer though, this post is not financial advice and we always recommend you consult with your specific accountant or lawyer.
Let’s dive in by clarifying that you can get this next round of PPP loan whether you had one before or not.
And if you have an existing PPP loan. Good news! Congress is pushing for the PPP loan to deduct covered expenses.
So here’s what you need to know to get the PPP loan in 2021.
How to Get the New PPP Loan 2021
Step #1: Make sure you qualify
Because of the current situation, struggling businesses need PPP funding as soon as possible, which means automation is needed and fraud is more likely to happen.
Feds recently seize $8.4 million from a Florida ministry in a PPP fraud case.
And you heard of others giving back PPP loan money because they ended up not needing it.
So of course, before you apply make sure this is something that you need.
Also, the PPP borrower must have an eligible entity which the bill defines as a Schedule C taxpayer, LLC, S-Corp, or partnership.
But apparently, you are not eligible if you only have a Schedule E (which is something you file as a landlord) or schedule F (which is something you file as a farmer).
That being said, here are the following NEW qualifications requirements.
A. The borrower must demonstrate that there was a 25% reduction from the gross receipts of the entity during the same quarter in 2019.
And we’ve heard that some people say that this rule only applies to companies that are losing money. That is not the case.
This is why it is so important to get your information from a reputable source.
However, you can still qualify for the new PPP loan even if your business is profitable. You just need to show a 30% reduction.
B. The borrower must employ no more than 300 employees, or meet an alternative size standard.
And this is according to a summary from the House Small Business Committee.
Now those are the major changes for the new PPP Loan in 2021.
Step #2: You must provide your documentation
The PPP loan is for payroll and other qualified expenses. So you’re going to need to provide proof that you have said expenses.
They may ask for personal tax returns, bank statements, pay stubs, etc. Again, to verify that you meet the financial requirements for the loan.
Step #3: Approval process
So after you complete your application and provide documentation, you should expect that your lender will review/approve while funds are remaining.
However, we know from experience how difficult this can be.
Now as promised, we want to share how we got our PPP loan back in May.
Originally, we used one of the big banks and we submitted our application on day one.
And after patiently waiting for two weeks, we heard absolutely nothing. Meanwhile, we saw headlines about how PPP funding was about to run out.
So, we called our bank several times, probably every day… sometimes twice a day to find out the status of our loan.
Yet, literally, no one from the big bank could give us an answer on when we will receive our PPP loans.
But at the same time, we were reading headlines about how Ruth Chris, Shake Shack, and the Los Angeles Lakers were getting millions in funding.
So it seemed like the big banks were playing favoritism and we decided to find a lender who catered to the small businesses. And that changed everything.
We used a company called Kabbage, which at the time was a third-party lender for small businesses. And their team was amazing.
We were able to complete the entire PPP loan application at once. While some of the big banks made you fill out two separate applications.
Also, they got back to us very quickly. It was always available to give us a status on our loan application.
Now this year, Kabbage was bought by American Express and our loan now lives with K Services.
But, this still may be a great lender to check out if you were having problems getting funding earlier this year.
By the way, they are not a sponsor of this post, and we don’t have an affiliation with them, we just completely enjoy their PPP process.
And we want you to secure funding too, so here’s a link to their website.
Step #4: Use the money correctly and avoid major changes
If you cut payroll or make pay decreases, those will likely affect the forgiveness amount of your loan.
Remember the loan was made to keep small businesses and their staff going.
So hypothetically even if you had zero revenue, you still should be able to keep your staff and ramp up when the time comes.
Now obviously, there are still expenses, depending on the nature of your business, there could be big variables like:
- cost of debt
- operating systems
It’s up to the business owner to still make prudent financial decisions so that they can stay in business.
The PPP loan certainly helps, but won’t save every aspect of your business.
In the best cases, you should be able to generate some revenue even if it’s declined, to keep things running smoothly.
So there you have it!
You should know by now if you are eligible for the new 2021 PPP loan, and what are some of those major requirements changes.
Also as a bonus, you now have an idea of an alternative approach you can take to getting approved.
And if ever you need expert advice or solutions regarding your financial situation, get in touch with one of our financial advisors today. Call us at 470-240-1437!