Two weeks after its 11th-hour passage by Congress, the second round of the Paycheck Protection Program (PPP) administered by the Small Business Administration has begun accepting applications for forgivable loans aimed at helping small and medium-sized businesses weather the storm caused by the coronavirus.
At $284 billion, PPP2 is about half the size of the first round, but also includes $130 billion in unallocated funds, bringing the total pool of funding to more than $400 billion.
Under the new program, loans will now be capped at 2.5 times monthly payroll or $2 million — down from $9 million — for companies with less than 300 employees who can show they suffered at least a 25 percent revenue loss in any quarter of 2020 versus the same quarter in 2019. As a special incentive, hard-hit restaurants and other hospitality industry businesses can apply for up to 3.5 times their monthly payroll.
“It is important to note that the vast majority of business owners and business types are eligible,” including sole proprietorship and LLCs with dozens of employees, said Steve Rabinovici, chairman at SBA Funding. “What’s important is that all businesses adversely affected by COVID-19 know they have an opportunity to access a 100 percent forgivable loan,” he added.
Certain Restrictions Apply
Like any loan program, PPP2 has its own rules and application process that borrowers and lenders need to be aware of, especially when not following instructions can cost a business the chance to have its debt forgiven.
After helping 100,000 businesses navigate loans through hundreds of lenders in round one, payment technology giant Fiserv said it plans to take a leading role in the second program too, with the aim of offering an updated, streamlined platform that takes any adjustments into account.
“We are confident that the approach we are taking will simplify the task of applying for and originating a loan and get relief to business owners, employees and communities as soon as possible,” said Todd Horvath, group president of Account Processing at Fiserv.
The Wisconsin-based financial services company also said the automated online process was intuitive and logical and designed to make workflow easy for bankers and customers alike.
Hurry, But Don’t Panic
While SBA Funding said first-time borrowers applying with community lenders will have first access to the PPP2 Monday (Jan. 11), second-time borrowers will be allowed to begin applying Wednesday.
No mention was made as to how quickly the loans might be disbursed, but the loan packaging firm said interested business owners should begin their applications as soon as possible, as there was no reason to believe that the program would not be exhausted quickly.
Besides payroll, PPP2 loans can also be used to cover rent and mortgage interest, utilities, essential supplies, and software as well as safety and protective equipment and gear. By design, the PPP2 program is only supposed to cover a few months of business operations, essentially biding time until the COVID vaccine can be disseminated and the economy is able to stabilize.
To that point, according to PYMNTS data, small and medium-sized businesses (SMBs) were feeling a bit more confident about their odds of survival than they were when the pandemic began last March. Specifically, 54 percent of SMBs surveyed said they expect to be around in the summer of 2022 as of the end of the year, up from 48 percent who believed that six months earlier.