Here’s What’s New in U.S. Small Business Pandemic Paycheck Protection Program

January 11, 2021

The Small Business Administration launches on Monday more Paycheck Protection Program loans to help small businesses weather the coronavirus pandemic. Congress last month approved $284 billion in new funds for the forgivable loans which are distributed by lenders on behalf of the government, adding to the $525 billion distributed last year.

The rules and process have been tweaked this round, partly to address problems that emerged last year and partly to ensure the program will meet the economy’s needs. Here are some key changes:

SECOND-DRAW LOANS

Some small businesses will be allowed to apply for a second PPP loan of up to $2 million. Eligible second-time borrowers must have no more than 300 employees and have either spent or intend to spend all of their first-time PPP loan on eligible expenses, such as wages and rent. Businesses will also have to show that they have been hurt by the pandemic, documenting a loss of at least 25% in gross receipts during any quarter in 2020 compared with the same quarter in 2019.

FLEXIBLE TIMING

Businesses will be able to use PPP funds over eight to 24 weeks, a more flexible and more clearly defined window than under previous loans. Some businesses felt pressured or struggled to spend their PPP funds so quickly, with many preferring to hold onto funds until really needed.

EXPANDED ELIGIBLE EXPENSES

PPP borrowers must spend 60% of the loan on payroll, as lawmakers primarily intended the program to help keep Americans employed. However, the program now allows the remaining 40% to be spent on a wider range of expenses. That includes protective equipment for workers, costs associated with building outdoor dining spaces and repairing property damage – a nod to businesses that may have suffered damage during widespread racial justice protests over the summer.

STREAMLINED FORGIVENESS

The program also includes a drastically streamlined process for obtaining forgiveness. For loans of less than $150,000, borrowers can simply sign and submit a brief form attesting that the money was spent as required in order for the loan to be forgiven. Banks had warned that the previously required receipts and documents were too onerous for smaller borrowers, making it difficult to process the millions of forgiveness applications.

FRAUD CHECKS

After the program was criticized last year for allowing fraudsters and big companies get cash, the SBA is introducing new safeguards. Previously, the SBA automatically approved loans that met basic criteria, but this time will conduct automated overnight identity management and data verification checks to ensure the money is going to legitimate businesses.

That could slow down the approval process by at least a day but since officials say that they expect the funds will meet business demand, that delay should not result in companies missing out altogether.

(Reporting by Pete Schroeder; editing by Michelle Price and Cynthia Osterman)

Topics COVID-19 USA Commercial Lines Business Insurance Small Business

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