A toy store at the Mall of America in Bloomington, Minn., last month. Small-business owners now have until Aug. 8 to apply for PPP loans.
Photo: kerem yucel/Agence France-Presse/Getty ImagesSmall-business owners who haven’t yet applied for forgivable loans designed to ease the economic pain of the Covid-19 pandemic now have another chance. Congress passed legislation extending the deadline for submitting applications for the federal Paycheck Protection Program, and President Trump signed the bill on July 4.
Below are answers to some frequently asked questions about the program:
What is the new deadline for PPP applications?
Small-business owners now have until Aug. 8 to apply for PPP loans. The Small Business Administration will begin accepting loan applications Monday, an SBA official said. The program’s original deadline was June 30.
Why is Congress extending the program? I thought the money ran out.
Roughly $130 billion of the $670 billion set aside for the PPP remains unclaimed. It took less than two weeks to deplete the original $350 billion in PPP funding, but demand was weaker after Congress allocated additional money to the program.
We Want to Hear From You
We would like to hear about your experience with the Paycheck Protection Program. Did you receive a loan and how did you spend it? How is reopening working for you, or your employer? Use the form at the end of this article to contribute to a future reporting project.
In addition, more than 170,000 loans totaling about $38.5 billion have been canceled as of May 31, according to a report issued June 25 by the U.S. Government Accountability Office. Some borrowers gave back their loans after the Treasury Department said public companies and others with alternative sources of financing shouldn’t tap the PPP; others returned funds because they didn’t feel they could meet the program’s original spending requirements because, for instance, their business remained closed.
How have the program rules changed?
Businesses that want to qualify for loan forgiveness now have 24 weeks instead of eight weeks to spend PPP funds. The portion of the loan that must be spent on payroll has been reduced to 60% from 75%. Companies won’t be penalized if workers who have been offered their jobs back with the same hours and pay don’t return.
The new requirements made loan forgiveness easier to secure for companies that were slow to reopen or whose business has recovered gradually, and for companies that spend more on rent and certain other qualified expenses.
Are there any changes in eligibility requirements?
The administration has relaxed some restrictions that made it difficult for people with prior criminal records to qualify for a PPP loan. Under the changes, a business can’t apply for a PPP loan if an owner with at least a 20% stake in the business was convicted, pleaded guilty, pleaded no contest or commenced parole or probation for a nonfinancial felony in the past year. Before the change, the look-back period was five years for nonfinancial crimes, the same as for embezzlement, fraud and other financial misdeeds. Businesses can also now apply for a loan if an owner was indicted on a misdemeanor charge, though restrictions remain for those indicted on a felony charge.
What if I received a PPP loan and gave back the money because my business wasn’t ready to open? Can I apply again?
“The answer coming out of Treasury is, ‘no’,” said Tony Wilkinson, chief executive of the National Association of Government Guaranteed Lenders, a trade group for lenders that originate SBA loans. “If you applied for a loan and subsequently gave the money back, they are considering the loan paid off,” which means a small business can’t apply again. “One business. One loan. That’s it.”
When the PPP was launched, I had trouble finding a lender who would take my loan application. Is that still a problem?
Roughly 5,500 lenders have originated PPP loans, according to the SBA, a list that has grown as more banks, fintech lenders and community-development financial institutions have been approved for the program.
JPMorgan Chase & Co. and Bank of America Corp. are among the banks that expect to resume making PPP loans once the program restarts, though they aren’t sure of the timing. Banks cleared their loan pipelines in anticipation of the program’s end, which should make it easier for them to handle new applications.
But some lenders don’t expect to resume taking loan applications. “There’s going to be a significantly smaller number of lenders participating in Round 3,” said Mr. Wilkinson of the lending trade group.
Related Video
Can I qualify for the PPP if I don’t have employees? If so, how will the bank determine the size of my loan?
Self-employed individuals, independent contractors and sole proprietors are all eligible for the PPP, even if they don’t receive an actual paycheck. For those businesses, the loan amount is tied to the net profit (or loss) for the business, as reported on Line 31 of Schedule C in 2019, even if they haven’t actually filed their tax return.
As is the case for all employees, the amount of income used in the PPP calculation is limited to $100,000. To calculate the loan amount, divide the net profit in 2019 by 12 and then multiply by 2.5.
What if my business was unprofitable last year?
Single-employee businesses are out of luck if they reported a loss last year. “This would not be the program for them,” said Everett K. Sands, CEO of Lendistry, a fintech lender based in Los Angeles.
Those borrowers should look to take advantage of state-run, small-business grant or forgivable-loan programs for assistance or the Small Business Administration’s Economic Injury Disaster Loan, he said. Even if one-person companies don’t receive the disaster loan, they could qualify for a $1,000 SBA grant.
What is the Economic Injury Disaster Loan?
The EIDL is a separate program open to small businesses affected by the pandemic. Prospective borrowers can apply for as much as $150,000 in loan funds to be paid back over 30 years; the first payment is deferred for one year. The loans carry a 3.75% interest rate for businesses and 2.75% for nonprofits. Even if their application is denied, businesses can receive a grant, or “advance,” of $1,000 per employee up to $10,000. The SBA resumed accepting EIDL applications June 15. Unlike the PPP, EIDL applications are submitted directly to the SBA. The SBA has said it is working to reduce the backlog of EIDL applications.
Write to Ruth Simon at ruth.simon@wsj.com and Peter Rudegeair at Peter.Rudegeair@wsj.com
A toy store at the Mall of America in Bloomington, Minn., last month. Small-business owners now have until Aug. 8 to apply for PPP loans.
Photo: kerem yucel/Agence France-Presse/Getty ImagesSmall-business owners who haven’t yet applied for forgivable loans designed to ease the economic pain of the Covid-19 pandemic now have another chance. Congress passed legislation extending the deadline for submitting applications for the federal Paycheck Protection Program, and President Trump signed the bill on July 4.
Below are answers to some frequently asked questions about the program:
What is the new deadline for PPP applications?
Small-business owners now have until Aug. 8 to apply for PPP loans. The Small Business Administration will begin accepting loan applications Monday, an SBA official said. The program’s original deadline was June 30.
Why is Congress extending the program? I thought the money ran out.
Roughly $130 billion of the $670 billion set aside for the PPP remains unclaimed. It took less than two weeks to deplete the original $350 billion in PPP funding, but demand was weaker after Congress allocated additional money to the program.
We Want to Hear From You
We would like to hear about your experience with the Paycheck Protection Program. Did you receive a loan and how did you spend it? How is reopening working for you, or your employer? Use the form at the end of this article to contribute to a future reporting project.
In addition, more than 170,000 loans totaling about $38.5 billion have been canceled as of May 31, according to a report issued June 25 by the U.S. Government Accountability Office. Some borrowers gave back their loans after the Treasury Department said public companies and others with alternative sources of financing shouldn’t tap the PPP; others returned funds because they didn’t feel they could meet the program’s original spending requirements because, for instance, their business remained closed.
How have the program rules changed?
Businesses that want to qualify for loan forgiveness now have 24 weeks instead of eight weeks to spend PPP funds. The portion of the loan that must be spent on payroll has been reduced to 60% from 75%. Companies won’t be penalized if workers who have been offered their jobs back with the same hours and pay don’t return.
The new requirements made loan forgiveness easier to secure for companies that were slow to reopen or whose business has recovered gradually, and for companies that spend more on rent and certain other qualified expenses.
Are there any changes in eligibility requirements?
The administration has relaxed some restrictions that made it difficult for people with prior criminal records to qualify for a PPP loan. Under the changes, a business can’t apply for a PPP loan if an owner with at least a 20% stake in the business was convicted, pleaded guilty, pleaded no contest or commenced parole or probation for a nonfinancial felony in the past year. Before the change, the look-back period was five years for nonfinancial crimes, the same as for embezzlement, fraud and other financial misdeeds. Businesses can also now apply for a loan if an owner was indicted on a misdemeanor charge, though restrictions remain for those indicted on a felony charge.
What if I received a PPP loan and gave back the money because my business wasn’t ready to open? Can I apply again?
“The answer coming out of Treasury is, ‘no’,” said Tony Wilkinson, chief executive of the National Association of Government Guaranteed Lenders, a trade group for lenders that originate SBA loans. “If you applied for a loan and subsequently gave the money back, they are considering the loan paid off,” which means a small business can’t apply again. “One business. One loan. That’s it.”
When the PPP was launched, I had trouble finding a lender who would take my loan application. Is that still a problem?
Roughly 5,500 lenders have originated PPP loans, according to the SBA, a list that has grown as more banks, fintech lenders and community-development financial institutions have been approved for the program.
JPMorgan Chase & Co. and Bank of America Corp. are among the banks that expect to resume making PPP loans once the program restarts, though they aren’t sure of the timing. Banks cleared their loan pipelines in anticipation of the program’s end, which should make it easier for them to handle new applications.
But some lenders don’t expect to resume taking loan applications. “There’s going to be a significantly smaller number of lenders participating in Round 3,” said Mr. Wilkinson of the lending trade group.
Related Video
Can I qualify for the PPP if I don’t have employees? If so, how will the bank determine the size of my loan?
Self-employed individuals, independent contractors and sole proprietors are all eligible for the PPP, even if they don’t receive an actual paycheck. For those businesses, the loan amount is tied to the net profit (or loss) for the business, as reported on Line 31 of Schedule C in 2019, even if they haven’t actually filed their tax return.
As is the case for all employees, the amount of income used in the PPP calculation is limited to $100,000. To calculate the loan amount, divide the net profit in 2019 by 12 and then multiply by 2.5.
What if my business was unprofitable last year?
Single-employee businesses are out of luck if they reported a loss last year. “This would not be the program for them,” said Everett K. Sands, CEO of Lendistry, a fintech lender based in Los Angeles.
Those borrowers should look to take advantage of state-run, small-business grant or forgivable-loan programs for assistance or the Small Business Administration’s Economic Injury Disaster Loan, he said. Even if one-person companies don’t receive the disaster loan, they could qualify for a $1,000 SBA grant.
What is the Economic Injury Disaster Loan?
The EIDL is a separate program open to small businesses affected by the pandemic. Prospective borrowers can apply for as much as $150,000 in loan funds to be paid back over 30 years; the first payment is deferred for one year. The loans carry a 3.75% interest rate for businesses and 2.75% for nonprofits. Even if their application is denied, businesses can receive a grant, or “advance,” of $1,000 per employee up to $10,000. The SBA resumed accepting EIDL applications June 15. Unlike the PPP, EIDL applications are submitted directly to the SBA. The SBA has said it is working to reduce the backlog of EIDL applications.
Write to Ruth Simon at ruth.simon@wsj.com and Peter Rudegeair at Peter.Rudegeair@wsj.com
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