SBA loans can help your small business

A loan from the Small Business Administration could be the answer you’ve been looking for.

SBA long-term loans with low-interest rates are an option for those business owners who have suffered substantial physical or economic damages due to a disaster or want to expand their business but cannot obtain non-government financing.

Consolidated Appropriations Act of 2021 and American Rescue Plan Act of 2021

The Consolidated Appropriations Act of 2021 and the American Rescue Plan Act of 2021 are not government loan programs. Congress passed these laws and provided funding and rules changes for several government programs, such as the Paycheck Protection Program (PPP), Economic Injury Disaster Loan (EIDL), and EIDL Advances. The funding is also for a new Shuttered venue operator (SVO) grant program.

The descriptions below reflect the changes made to the American Rescue Plan and CAA. Updates may be required if the Treasury Department or the SBA provides additional guidance.

Paycheck Protection Program (PPP)

The Paycheck Protection Program ended on May 31, 2021. This information is intended to provide background for borrowers eligible for PPP loan forgiveness.

The Paycheck Protection Program, created by the Coronavirus Aid, Relief, and Economic Security Act on March 27, 2020, provided forgivable SBA 7(a), emergency loans up to $10,000,000 to small businesses, including sole proprietorships, contractors, and people who are self-employed and affected by COVID-19.

The PPP Flexibility Act of 2020 amended this program with new guidelines allowing complete or partial forgiveness of 60% (previously 75%) of the forgiven amount if it was used to pay payroll and 40% (once 25%) of the discounted amount was used to pay mortgage interest, rent, and utilities.

Your loan was delayed until the SBA returned the forgiven amount to your lender. If you did not seek forgiveness, your payments would be deferred by ten months after the covered period ends. 8

The loan was free of fees and had no collateral requirement as with the original PPP. You now have five years instead of two to repay your loan.

The PPP Flexible Act of 2020 stipulated further that if an employee refused to accept your offer, you could exclude them from the forgiveness calculation if you made a documented offer of rehire (same wages, same hours).

The Consolidated Appropriations Act of 2021 made changes to the PPP

The Consolidated Appropriations Act 2021 provides $284 billion for new PPP loans through March 31, 2021. This includes special set-asides for companies in depressed economic conditions and those with fewer than ten employees.

The law provided for first-time forgiven PPP loans up to $10,000,000 for companies that qualified with 500 or fewer employees and second-drawn loans up to $2,000,000 for previous borrowers who had 300 or fewer workers.

You can reapply if you have returned part or all of your PPP Loan, provided you have yet to receive forgiveness. If you are eligible for a more considerable loan amount because of interim final rule changes, you can work with your lender and modify your loan amount, even after forgiveness.

The list of expenses that can be forgiven has been expanded to include

Personal protective equipment (PPE).

Compliance with federal and state health and safety regulations.

Cloud computing, software, and other accounting and human resource needs.

Insurance does not cover property damage caused by public disturbances in 2020.

This is a new feature. Expenses paid with PPP proceeds are tax-deductible, even if you have forgiven the loan. The first-draw and second-draw loans were both covered. 16

Instead of choosing between eight or twenty-four weeks, you could select a period between eight and twenty-four weeks. You could extend your covered period until March 31, 2021. 17

PPP Loan Program Changes that Target Very Small Businesses

On February 22, 2021, the Biden administration announced several changes to its PPP program. These changes were designed to provide PPP funds to small businesses previously excluded from relief efforts.

Businesses with fewer employees than 20 had a two-week exclusive window beginning February 24, 2021, to apply for PPP financing. During this time, large companies were prohibited from using it.

The formula for calculating PPP loans has been revised to allow sole entrepreneurs, independent contractors, and self-employed individuals to receive more financial assistance.

The eligibility rules have been changed so that small business owners who do not have a fraud-related felony can receive PPP loans as long as they are not in prison when the loan application is made.

Delinquent federal student loan borrowers are also newly eligible.

Small business owners from outside the United States who are legal residents in the U.S., such as green card holders or those on visas, were also eligible to apply for PPP relief and permitted to use their taxpaying identification numbers (ITINs).

How to Apply for a SBA Paycheck Protection Program Loan

This loan can be obtained through existing SBA 7(a), federally insured depository institutions, federal credit unions, or Farm Credit System institutions.

The SBA announced, and the Treasury Department confirmed that the PPP would reopen for new borrowers and existing PPP recipients on January 11, 2021. 27

The same lenders made second-draw PPP loans on January 13, 2021. The same lenders began offering second-draw PPPs on January 13, 2021. 26 Small lenders with assets less than $1 billion were eligible to provide first-draw loans. All participating PPP lending lenders were approved to begin making loans on January 19, 2021.

Don’t use any other route to apply for a PPP Loan: Scammers offer shortcuts just like they did in the original program. On April 17, 2020, the Federal Trade Commission filed suit against one of these companies. The FTC warned that you should only apply through the SBA’s website, and the SBA would never ask you for your Social Security number or bank account numbers.

Economic Injury Disaster Loan Advance

As part of the EIDL application process, small business owners from all 50 states, Washington, D.C., and U.S. Territories, were eligible to apply for an Economic Injury Disaster Loan (EIDL). Advances of up to 10,000 dollars could be obtained. It was unnecessary to repay the loan advance, and it wasn’t required to have been approved for an EIDL to receive the advance. However, the amount was deducted from the total loan eligibility.

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