PPP loans just opened to all small businesses again. Here’s what to keep in mind when applying

When the federal government launched the Paycheck Protection Program last April, it aimed to help small businesses cover the cost of retaining employees, and cover losses in revenue. But the process didn’t start smoothly.

Banks has to scramble within a few days to understand the parameters set out by the government, and small businesses owners braced to see if they’d receive critical cash to keep their companies running. Some went to apply only to find out their banks hadn’t opened applications, or were concerned funding would run out by the time they did.

About eight months later, another round of the program just opened again, this time with a special emphasis and early access to businesses run by underrepresented founders, who were largely left out of the first round of funding.

On Jan. 11, applications opened only for businesses using community financial institutions, which lend to minority-owned and economically disadvantaged businesses. In the first week of this second round, the U.S. Small Business Administration approved approximately 60,000 PPP loan applications submitted by nearly 3,000 lenders, worth over $5 billion, it said in a news release Tuesday.

On Jan. 19, the applications opened again to all other small business owners.

Some companies that received a first-round loan can get a second draw this time around, too. Eligibility for a second loan requires that a business “will or has used” all of the money from the first loan. Those businesses also must have fewer than 300 employees, instead of the 500-employee limit of the first round, and must demonstrate a 25% reduction in gross receipts between between quarters in 2019 and 2020. The maximum amount of a second-draw PPP loan is $2 million, instead of $10 million from the first round. (Requirements vary for first-round draws.)

In the first round of PPP, M&T Bank, which operates across the mid-Atlantic and Northeast region of the U.S., approved nearly $422.7 million across 1,100 Philly-area applications, affecting 37,259 local jobs, said Chad Palank, its regional manager of business and professional banking.

Palank, who was heavily involved in the bank’s initial launch of the program and its online portal, told Technical.ly he believes interest in the loan program is still strong in its second round. This round is also more targeted to especially vulnerable industries, like hospitality, but are open to any industry. It’s also more targeted to what is considered a true small business, including via that 300-employee limit.

“If you can, talk to your CPA, your bankers and understand the specifics of your needs,” he advised business owners. “What are your ongoing needs going forward? There’s no crystal ball. We hope things improve, but get with your internal finance person and talk through your cash position and get a clear understanding of where your resources come in.”

From the approved applications M&T Bank saw in the first round, nearly 80% of small businesses used the funds within their assigned window of time and applied for forgiveness, or are ready to, Palank said. In his experience, the SBA is working quickly and issuing forgiveness already for many first-round companies.

Palank also wanted to make clear that business’ first round of loans don’t need to be forgiven to apply for another round. Many will apply for the same size of loan from the first round. Some companies from the first round even ended up returning the loans or declining them after getting a better understanding of their financial situation.

“We’ve seen some companies change the amount they’re taking out, seen some companies saying ‘we actually don’t need it,'” he said. “They didn’t want to take it away from a company that might need it more. I definitely think humanity has stepped up in times like this, and we’ve seen folks helping each other.”

This time around with applications, we’ll likely see less urgency, as most companies have had time to prepare and have a better understanding of what the next six or 12 months holds for them financially.

“The sentiment is that we’re not fully through the tunnel, but we can see the light,” Palank said.

Find PPP lender forms and guidance at sba.gov/ppp.