3 Things You Should Know About the Paycheck Protection Program in 2021
Pandemic restrictions made 2020 a tough year for businesses, and 2021 isn’t looking any easier. Because of this, the Paycheck Protection Program (PPP), which offered loans to companies in April of 2020 to help businesses keep their doors open, is funding a second round of loans in January 2021.
I recently held a Q&A detailing some of the policies of round 2 of the PPP loans and how Lendio can help businesses apply for those loans.
Our goal is to give business owners the best and easiest access to funding for their businesses: “Let us do everything we can to make that easier and put you in touch with the lender that will get you the loan the quickest, with the best customer experience, and along the way, we’ll try and answer every question we possibly can.”
Whether you’ve applied for a PPP loan before or are considering applying for the first time, the process of obtaining a PPP loan can be overwhelming. But if you own a business and are considering to apply for a PPP loan, here are three things you might need to know before you start your application.
1) Loan applications
The applications for a PPP loan became available in mid-January from the Small Business Administration (SBA), and business owners can apply online for either a First Draw or Second Draw loan.
Regardless of whether this is your first or second loan application, you cannot apply for a PPP loan directly through the SBA website — the application must go through a business like Lendio. Whichever loan you are applying for, you can apply for PPP loan directly on Lendio’s website.
If you’re applying for a Second Draw, it does not make a difference whether you use same lender both times. Lendio will simply match you with whichever lender can process your loan application the fastest.
And if you’re applying for the Second Draw, you can simply log in to Lendio and go to ‘edit application.’ If you are using documentation from your old application, it is important to make sure everything is still up to date. Double check expiration dates for IDs, make sure your ownership information is up to date, and validate your payroll information to make sure your application gets processed smoothly.
2) Business eligibility
While funding for the PPP loan ran out quickly in April, the SBA believes that the funding for this second round of loans should last for at least a month, if not two to three. This is because the SBA has decreased the maximum loan size from $10 million down to $2 million, so some of the largest businesses will not be approved for a loan.
If your business received a PPP loan in 2020 but you need additional funding to keep your doors open, you can still be eligible for the Second Draw. However, you can only apply for the Second Draw if you can show a 25 percent reduction in revenue in any quarter from 2019 to 2020.
Even if your business closed its doors in 2020 and hasn’t reopened, you can still apply for a PPP loan. As long as your business was in existence prior to February 15th, 2020, you can still be eligible for a loan to get your business back up and running.
Businesses in the hospitality market — such as restaurants, theaters, and hotels — were hit especially hard when the pandemic began. So the PPP has increased the amount that businesses in the hospitality industry (businesses that have an industry code starting with the number 72) can apply for.
Most businesses can apply for 2.5 times their monthly payroll, but hospitality businesses can now apply for 3.5 times their payroll.
3) Loan forgiveness
When it comes to PPP loan forgiveness, there are a couple of changes you need to know about. For instance, if your loan size is less than $150,000, the SBA application for loan forgiveness has been simplified to one page.
Additionally, if you are applying for a Second Draw loan application under $150,000, you are not required to provide any financial statements or documentation upfront, though you will need to provide those documents eventually as part of the forgiveness process.
If you are forced to close your business even after obtaining both a First Draw and Second Draw loan, you are still eligible for loan forgiveness, as long as the money from those loans was used appropriately. You will have to document that the loans were used to keep your business’s doors open — paying for things like payroll, rent, and utilities. But as long as you have clear documentation, you will be eligible for loan forgiveness if your business has to shut down permanently in the future.
When you apply for loan forgiveness, you can use a tool in Lendio called Sunrise, which is a free service that provides accounting and cash flow management tools, invoicing tools, and a bookkeeping service. Sunrise has an entire section dedicated to forgiveness prep that helps business owners put together a forgiveness package that they can then submit to a lender.
Why use Lendio?
Submitting a First or Second Draw loan application can be an overwhelming process, but Lendio is there to help. Our goal is to make the loan application process as easy and efficient as possible for business owners.
Lendio is a marketplace, not a lender. Because Lendio acts as an agent to the lenders giving out PPP loans and gets paid directly through those lenders, Lendio’s services are totally free for business owners applying for a PPP loan.
Lendio also has a large network of available lenders, meaning we can match you up with whichever lender can process and approve your PPP loan the fastest.
So whether you are applying for your First Draw or your Second Draw, we want to make this process efficient, easy, and
