Phil Castle, The Business Times
A federal loan program established to help businesses endure the effects of the coronavirus pandemic has reopened to applications.
In addition, the deadline to apply for a second loan program has been extended to the end of 2021.
Vance Wagner, regional president of ANB Bank, said the programs offer needed financing and potential benefits. But he encouraged small business owners and managers to work with their accountants or bookkeepers to ensure their operations meet requirements.
Moreover, the specifics of the programs and application processes could be subject to change, Wagner said. “It continues to be a fluid situation.”
Lenders eager to help businesses face challenges doing so, he said. “It’s rewarding and frustrating at the same time.”
The U.S. Small Business Administration re-opened the Paycheck Protection Program (PPP) for new and existing borrowers. Up to $284 billion has been authorized to promote job retention and cover other expenses through March 31.
The SBA also extended the deadline to apply for its Economic Injury Disaster Loan (EIDL) program through Dec. 31.
Under updated provisions of the PPP, borrowers can get the covered period of their loans for any length between 8 and 24 weeks.
The PPP continues to offer loans to cover payrolls — 2.5 times average monthly payroll expenses for most eligible businesses and 3.5 times payroll expenses for restaurants and lodging businesses. But the program also will cover additional expenses, including rent and utility payments, supplier costs and the expenses of personal protective equipment for employees.
The program also has been expanded to include member-based groups, housing cooperatives and destination marketing organizations.
The loan cap has been reduced, though, from $10 million to $2 million
Certain PPP borrowers can ask to modify their loan amounts.
Borrowers also are eligible to apply for second loans under certain conditions. They must have — or will — expend the full amount of their first loans for authorized uses and employ no more 300 people. In addition, borrowers must demonstrate a loss — at least a 25 percent reduction in gross receipts between comparable quarters in 2020 and 2019.
Wagner said its important for loan applicants to show they can pass the needs test. Some documentation requirements have become more stringent, he said.
The PPP loan forgiveness process has been simplified, though. Businesses that borrowed $150,000 or less need only submit a one-page certification that includes the total loan amount, the number of employees the business retained as a result of the loan and how much of the loan was spent on payroll.
The Economic Injury Disaster Loan program also will reopen with an application deadline extended to the end of 2021 pending the availability of funds.
Loans are offered with an interest rate of 3.75 percent for small businesses and 2.75 percent for nonprofit organizations. Terms include a 30-year maturity and an automatic deferment of one year before monthly payments begin.
Applications also are expected to soon be available for $10,000 grants offered under the EIDL program.
To apply for grants, businesses must have been in operation prior to Jan. 21, 2020; employ less than 300 people; are located in eligible low-income communities; and suffered at least a 30 percent reduction in gross receipts between March 2, 2020 and Dec. 31, 2021 compared to the same period in 2019.
For more information about provisions of the Paycheck Protection Program, visit the website at www.sba.gov/ppp.