The Paycheck Protection Program (PPP) is close to releasing a second round of loan funds for small businesses sometime this week. This new measure has already been passed by the Senate and is awaiting House approval before officially becoming available to the public. For those that missed out on applying for the first round or got stuck somewhere in the middle of the approval process, here’s what you can expect from the extension.
What to expect from the second round of PPP loans
The unfortunate reality with the Paycheck Protection Program is that it is a highly sought after source of forgivable funding with a limited supply. The original $350 billion was claimed in just 13 days and that was when lenders were navigating a new application process and businesses were still unraveling what was necessary to apply. Now, the process is set, more and more businesses are prepared to apply and the extension provides less funding than the first round. If the original funding took less than two weeks to run out, you can expect this next round to take even less time.
However, there are some key takeaways from the first round of applications that may help you submit an application and gain approval before loan funds run out.
- Prepare your application and documentation ahead of time: You want to be sure you can apply as soon as the funds are available.
- Avoid larger banking institutions: There were reports that bigger banks prioritized PPP funding for larger customers. If you’re a smaller business and able to work with a small bank, credit union, or fintech lender, you may have a better chance.
- Chat with a real person: Much of the application process is automated, but it’s important to connect with a person from your lending institution. This can help ensure that you provided all necessary documents and that you have direct insight into the status of your loan.
While there’s still a great amount of uncertainty involved with the PPP, keeping these things in mind can help you when applying or reapplying this time around. Read on for more information regarding the extension and how to apply.
How much money is available in the second round of PPP loans?
The PPP extension will provide an additional $310 billion in low-interest small business loans, that will still be administered by SBA approved lenders. $60 billion of this will be allocated for smaller banking institutions and credit unions, to give smaller businesses a better shot at being approved.
How do you apply for a PPP loan?
The application process and required supporting documents will be the same as the first round. While the necessary documentation may vary based on your specific business, chosen lender, and a number of other factors this is what you should have prepared to apply:
- PPP loan application: This document is available online and accepted by all SBA approved lenders. If you plan on applying through a fintech organization (ie Intuit, PayPal, etc.) you may have to fill out an additional application through them.
- Payroll documentation: You can either run a report from your accounting system, or from your payroll system.
- Profit & Loss report from the last 12 months: Again, you should be able to get this from your accounting system. Not all banks will ask for this information.
- Your most recent tax return: Some banks will ask for your most recent tax return
- Articles of incorporation: You should have this document on file from when you formed your business. If you are applying for the loan from the bank you normally do business with, they may already have a copy on file.
- For nonprofits: You’ll need a copy of your bylaws and a copy of the minutes from the board of directors meeting where the board approved applying for the loan.
Getting approved for your loan quickly is important. Read our guide on what you can do to ensure your PPP application is approved. We also have an exhaustive checklist of everything you need to apply for PPP loans and SBA disaster loans.
Where can you apply for a PPP loan?
You can apply for a PPP loan at any SBA-approved lender. This includes banks and some technology companies like Intuit, Divvy, and PayPal. Your bank may not be an SBA-approved lender, so it’s important to check with your own bank first and be prepared to shop around to find another lender who will process your loan if your own bank can’t or won’t do it for you.
Has the PPP loan forgiveness process changed?
As with the application, the process for submitting for loan forgiveness after you’ve been approved remains the same. The purpose of the loan is still meant to help your business maintain payroll, rent, utilities, and other eligible expenses. If you let go of employees, cut payroll, or utilize the loan for ineligible expenses, the amount that can be forgiven will decrease.
Read our guide on how to apply for loan forgiveness for a full rundown of eligible expenses and how to calculate your potential loan forgiveness.
What do you need to do after you get a PPP loan?
Keeping close track of your expenses after you get your PPP loan is critical to ensure that you maximize the amount of the loan that will be forgiven. You’ll need to keep things like payroll records, receipts for rent or mortgage payments, and insurance receipts.
It’s also important to create a financial forecast and expense budget to make sure that you manage your PPP cash properly. If you’re a LivePlan user, we have a guide for using LivePlan to manage your PPP cash.
Alternatives to PPP
While a PPP loan may seem like the only option, there are alternatives still available to you. One such option is a COVID-19 SBA Disaster Loan, which allows for an immediate $10,000 grant when you apply. Additionally, there are some state-funded resources similar to PPP available, as well as traditional venture capital options and tax breaks to explore.
Read our guide for a full rundown of eligibility and application requirements for the SBA Disaster Loan.