MoneyLife

Paycheck Protection Loans, How to Qualify and Apply

By Jacinta Sherris

Small businesses that continue to struggle financially due to the pandemic may be eligible to apply for another round of Paycheck Protection Loans. 

What is a Paycheck Protection Loan?

Many companies were hit hard financially as a result of the pandemic. They were forced to lay off employees and couldn’t pay essential bills, like rent and utilities. Paycheck protection loans became the lifeline many companies needed to stay afloat and pay their employees during the health crisis. 

On December 27, President Trump signed into law a $900 billion Covid aid package, which included another round of Paycheck Protection Loans for qualified small companies, sole proprietors, independent contractors, and self-employed individuals. $284 billion was allocated to PPP this time, compared to $659 billion earlier this year.

How does the Paycheck Protection Program Work? 

Some of the features of the Paycheck Protection Program include;

  • The loan is meant to keep workers on the payroll. Under the original Paycheck Protection Loan, businesses could use the funds to pay essential expenses such as rent and utilities. The second round of funding expands the eligible expenses. 
  • Like the first round of PPP funding, loan proceeds used to pay for qualified expenses may be fully forgiven. 
  • The borrower must apply for loan forgiveness. Any portion of the loan that is not forgiven must be repaid within five years at 1% interest. 

What’s New with the PPP Loans?

There are some noticeable differences with this second round of PPP funds. These include:

  • The loan amount is determined by taking the employer’s average monthly payroll and multiplying it by a factor of 2.5. Preliminary guidance indicates that an employer may calculate this average based on (a) the 2019 calendar year or (b) the one year before the loan’s date. 
  • Eligible restaurants and hotels may use a factor of 3.5 to determine their loan amount.
  • The time that a borrower has to use the funds, known as the “covered period,” must be at least eight weeks and no longer than 24 weeks. Unlike the first round of PPP funding, the borrower can choose how long their covered period lasts. 
  • Eligible expenses that a company can use the PPP loan for have been expanded. In addition to payroll, rent, and utilities, proceeds can be used for covered operation expenses, property damage, supplier costs, and worker protection expenses. 

Small Businesses Can Get Another PPP Loan

A small business may be able to receive a second PPP loan if they meet the following requirements:

  • Have 300 employees or less
  • Used all proceeds from their first PPP loan
  • Experienced at least a 25% drop in gross receipts in the first, second, or third quarter of 2020 compared to the same quarter in 2019. 

How Does PPP Loan Forgiveness Work? 

A business applies for PPP loan forgiveness by completing SBA Form 3508. Your business may be able to apply for forgiveness using the SBA’s EZ Loan Forgiveness Application. When completing your application for forgiveness, you may be asked to submit additional documents like bank statements, invoice copies, and canceled checks. 

The amount of loan forgiveness a company receives is based on meeting the following requirements:

  • At least 60% of the funds go towards payroll-related expenses.
  • No more than 40% of the PPP loan proceeds may be used to pay for eligible expenses such as rent, mortgage payments, and utilities. 
  • If the employer’s headcount or employee wages are reduced, the company may not be eligible to have its loan wholly forgiven. Preliminary guidance indicates that a company has up to five years to repay any portion of the loan that was not forgiven. The loans carry a 1% interest rate and don’t include additional fees.

Can I Apply for a Paycheck Protection Loan Now? 

The SBA has ten days after Congress authorized the second round of PPP funds to provide further guidance and details about the program. At the time of this writing, applications are not yet available. 

Keep in mind that PPP loan applications are processed on a first-come, first-served basis. Stay in touch with your lender to find out when the SBA application is available. 

If you’ve never applied for a PPP loan before or would like to try a different lender, click here to find an approved SBA lender. 

What Happens if I Don’t Qualify for the PPP Loan?

If you did apply before and were turned down, it’s essential to find out why you didn’t qualify. With most companies enduring almost ten months of financial strain, your company’s situation may be vastly different. You may be eligible for PPP funds with this next round. 

Check out MoneyLion’s resource of federal and state business relief funds for small business owners and independent contractors. 

Are There Any Loans Available Now? 

Through the SBA, the second round of PPP funds is expected to be available at banks, credit unions, and other designated SBA lenders within the next few weeks. Be sure to stay in touch with your lender. 

If your business is really in a financial bind, find out if you can take advantage of any loans from your lender. 

Line of Credit

If you have a decent credit score, you may be able to qualify for a line of credit for your business. A line of credit can be a good option to get a boost of cash now. If you qualify, you pay interest on any amounts you’ve taken out of the line of credit. 

Stimulus Bill

Congress recently passed a bill in December that offers up to $600 in stimulus funds for each qualifying adult and dependent child in a household.  The House subsequently passed a defense bill to raise the payment to $2,000 for every qualifying adult, but the increase was later blocked.

When you open a RoarMoney account by Money Lion, you can get payroll and government checks up to two days earlier. You don’t need to carry a minimum balance in your account, plus you are eligible for cashback rewards. A RoarMoney account is easy to setup and charges a $1 monthly fee.   

Instacash

If you are in a bind and need to get your hands on some quick cash, MoneyLion’s Instacash program can help. There is no credit check required for this zero-interest cash advance program. It’s easy to apply on the MoneyLion app. If you qualify, you could get your money the same day. 

Credit Builder Loan

If your credit score isn’t high enough to meet a bank’s requirement for borrowing money or taking out a line of credit, consider taking a Credit Builder Loan. If you qualify, you can borrow up to $1,000 at a low APR. Not only is it easy to apply for a loan, but they also aren’t based on your credit. As an added plus, your credit score may get a boost when you make your payments on time.

Learn more about MoneyLion’s Credit Builder Loans

Small Business Help During the Pandemic

The effects of the pandemic have wreaked havoc on businesses since March. Millions of employees lost their jobs and benefits during this struggle. The economic forecast continues to look bleak across the country.

Help for businesses and individuals is on the way. The government stimulus package was finally signed into law in December with $600 checks. Get paid up to 2 days early on the stimulus and paychecks with a MoneyLion RoarMoney account. 

No one knows how long this health crisis will be draining the life out of small businesses that once thrived. Whether you take out a PPP loan, get financing from the bank, or try one of MoneyLion’s programs to get fast cash and build credit, there are resources that can help.

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