Loans under a new round of federal Paycheck Protection Program will reopen on Monday for new borrowers and on Wednesday for those that got a loan earlier in the pandemic, the U.S. Small Business Administration and the U.S. Treasury Department said Friday.
This round of the loans, which are to be used for job retention and certain other business expenses, will run until March 31. The loans will require different applications from the initial loans last April. Application forms were released Saturday.
Updates this time around allow borrowers to set their coverage period anywhere between eight and 24 weeks. The previous loans required borrowers to choose either eight or 24 weeks, making it difficult for some to time when they could bring furloughed employees back to work.
The loans will cover additional expenses, including operations, property damage, supplier costs and worker protection expenditures. They also provide greater flexibility for seasonal employees.
The program now includes 501(c)(6) nonprofits such as chambers of commerce, trade or professional associations, housing cooperatives and direct marketing organizations. Publicly traded companies cannot get loans.
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Certain existing borrowers can ask to modify their first loan amount and apply for a second loan. However, there are more stringent guidelines for those applying for a second loan. The borrower must use the full amount of the first loan only for authorized purposes. Second-time borrowers can have no more than 300 employees, compared to 500 for first loans. They also need to demonstrate at least a 25 percent reduction in gross receipts between comparable quarters in 2019 and 2020.
New applicants can borrow up to $10 million while second-time borrowers can tap up to $2 million. In the case of both loans, borrowers must use at least 60 percent of the loan for payroll to have it forgiven. Businesses with loans of $150,000 or less qualify to use a simplified forgiveness application.
There is also good news for restaurants, bars and hotels, which have been hard hit by the pandemic. They qualify for loans worth up to 3.5 times their average monthly payroll costs. Most other eligible businesses get a maximum loan that is 2.5 times average monthly payroll costs.
Another change is that businesses that received up to $10,000 grants from the Small Business Administration’s Economic Injury Disaster program will not have that amount subtracted from the total forgiveness they get from their paycheck protection loan. Businesses that already received forgiveness will get the $10,000 retroactively applied to their forgiveness.
More information is on the Small Business Administration’s website.