While we are all giving our best to make it through the turmoil caused by the COVID-19 pandemic, NSBA has initiated to give a preliminary overview of the new round of the Paycheck Protection Program (PPP). The webinar conducted by National School Boards Association (NSBA) on January 6, 2020, Wednesday talked thoroughly about the PPP and how America’s small businesses can overcome the deteriorating effect of the coronavirus.
NSBA President Todd McCracken and Marilyn Landis, the owner of Basic Business Concepts Inc. provided valuable advice to small enterprises on where the current Paycheck Protection Program (PPP) stands and what changes were made to the program in compliance with recently passed legislation. Both experts have covered the regulations and clarified perplexing aspects during the webinar.
What is the Paycheck Protection Program (PPP)?
As a part of the $2 trillion support package announced in the Coronavirus Aid Relief and Economic Security (CARES) Act, $349 billion of the grant was contributed to the Paycheck Protection Program (PPP). This aims to provide guaranteed loans to businesses with less than 500 employees to meet payroll and other necessary expenses.
The federal government has unveiled to release funds as fast and smooth as possible, giving small firms a fair fighting chance to overcome their challenges and boost their growth in the best possible manner.
Paycheck Protection Program (PPP) Loan – Key Highlights
The Paycheck Protection Program Flexibility Act has made vital changes to the program, empowering adequate time to be invested to spend on funds and making it easier to receive a loan fully forgiven. The recent program has brought a golden opportunity for small businesses that have used up their first PPP loan and have seen at least a 25% drop in revenue. Here’s the overview of PPP loan:
- All small businesses are entitled to apply
- The loan has an interest rate of 1% and a maturity rate of two years
- Loans taken after June 5, 2020, have a length of 5 years
- There is no requirement to make loan payments until either your forgiveness application is processed or 10 months following your 24-week period ends
- The loan covers costs of 24 weeks beginning from the loan disbursement date
- No collateral and personal guarantees needed
- The loan can be forgiven and turn into a non-taxable agent
How Small Businesses were served Under Paycheck Protection Program?
According to Internal Revenue Service (IRS) data, $30.7 million were given to small businesses, wherein $5.9 million was reserved for employer firms and $24.8 million was kept aside for non-employer firms. In total, about $16.5 million PPP/EIDL was announced for eligible small firms.
More than half of small businesses have received funding to stand a chance to overcome the devastating effect caused by the COVID-19 crisis. These loans will cover multiple additional expenses such as property damage, operations expenditure, worker protection expenditures, and supplier costs.
Changes Made to PPP in Round 2
- PPP loan size dropped from $10 million to $2 million
- Businesses fewer than 300 employees and have faced a 25% decline in revenues are eligible
- The maximum loan size is 2.5 times for monthly payroll and 3.5 times for food service business and accommodation
- A full forgiveness is permitted if at least 60% is used for payroll
- Streamlines forgiveness procedure for loans under $150,000
- $90 billion funds are kept aside for new and second-time borrowers
- Increases the allowance expenses for supplier contracts, equipment, and expenses associated with the COVID-19
- Eradicates the need for EIDL loan advanced from PPP forgiveness
- Offers $20 billion in EIDL grants
- Increases assurance to 90% and waives all fees
How to Start with PPP Application Process?
We advise small businesses to gather their relevant documents to enjoy a timely and simplified PPP application process. While the needs are subjected to be changed, it is best to review the resource made available to you, bring together your application, and clarify your concerns as soon as possible. It is important to identify how well you can demonstrate a 25% decline in revenue from 2019-2020 and create your interim financial statement.
After negatively affected by the COVID-19 outbreak, small businesses are finally getting an equal chance from the federal government to obtain the benefit of a new relief package and ensure business survival. In these times of uncertainty, it seems like a viable option for small businesses to obtain a competitive edge over others and contribute to the economic condition.