The short answer is, “No, you can’t,” according to the Small Business Administration (SBA). But, while the PPP loan may no longer be available for businesses, nonprofits, or churches, there are still plenty of accessible small business funding opportunities if you know where to look. We can help. Here’s what to know about PPP loans, PPP forgiveness, and alternate sources of relief monies.
Summary
What’s a PPP loan?
Enacted in early 2020 as part of the CARES Act, the SBA Payroll Protection Program (PPP) provided much-needed funding for small businesses battling to keep their doors open and employees on the payroll. Small companies were encouraged to fill out a PPP loan application with one of the SBA-authorized PPP loan providers. Upon approval, businesses would receive money to cover up to eight weeks of payroll (wages), rent,
mortgages, and utility costs. The PPP loan requirements stipulated companies needed to have fewer than 500 employees, could apply for up to $10 million in relief, and could be any business structure—including independent contractors, sole proprietors, self-employed, LLCs, S Corps, C Corps, and partnerships. Then, if the right conditions were met, the SBA would forgive the entire loan amount. Any remaining monies owed would incur a 1% interest.
As the original PPP loan deadline drew near, it was clear the $349 billion set aside for the PPP loans would not be enough, and by April 16, 2020, first-round funding was tapped out.
Second PPP Loan
On April 24, 2020, an additional $480 billion in relief funding was signed into law, giving the PPP an additional $310 billion. However, the eligibility requirements for PPP Loan 2 changed. The new round of PPP loans was available to small businesses that did not receive a first PPP loan. In addition, the second PPP loan could go to the companies that received the first round but needed a second loan and first-round PPP loan recipients who had returned all or part of their loan and wanted additional funding. Applicants also had to have fewer than 300 employees and could demonstrate a 25% reduction in gross revenue from any quarter in 2020 compared to the same quarter in 2019. Finally, $2 million was the maximum loan amount available for round two.
As you can guess, by the time the deadline rolled around in August 2020 and COVID-19 marched on, more funding was needed to help small businesses get back on their feet. Enter PPP loans round 3.
PPP Loan: 3rd Round
Signed into law in December 2020, H.R. 133 – Consolidated Appropriations Act, 2021 gave the PPP loan program its final $284 billion to distribute gradually until May 31, 2021, or until funds ran out. Micro-sized businesses with less than 20 employees and small businesses in lower-income areas could apply before other small companies. Once again, eligibility requirements changed—there was more leniency in where the funds could be spent, and no collateral or personal guarantees were required.
PPP Loan for Nonprofits or Churches
In general, nonprofit organizations, which include 501(c)(3) and 501(c)(6) nonprofit organizations (professional associations and chambers of commerce), were eligible to apply for PPP loan relief. The only excluded nonprofits were 501(c)(4) organizations. These nonprofits for social welfare were not eligible for a PPP loan.
PPP Loan Forgiveness
Depending on when you received the PPP loan or loans, you may have already heard from or soon will hear from your lender notifying your business to apply for PPP loan forgiveness. Because the forgiveness process promised to be a significant documentation nightmare for lenders, the SBA tried to simplify the steps by creating different forgiveness applications contingent on when your business received funding and how much you borrowed.
If you received a Kabbage PPP loan, Womply PPP loan, or used another fintech alternative lender to get a PPP loan, check back with them to see if you should apply for forgiveness through the fintech’s website or directly through the SBA’s website. Small business owners who received PPP loans of $150,000 or less can go straight to the SBA online portal to apply for forgiveness without contacting their original lenders.
For more on PPP forgiveness, visit the SBA website.
EIDL Loan vs. PPP
In addition to the PPP loan program, the CARES Act Funding Relief also provided for the Economic Injury Disaster Loan (EIDL). Small businesses affected by the pandemic could fill out an EIDL application for up to $500,000 (Note: the loan cap was initially set at $2 million but was lowered to $500,000). Unlike the PPP loan program, EIDL loans are still available and issued directly through the U.S. Treasury. Small businesses apply directly through the SBA website.
EIDL program loans have an interest rate of 3.75% (2.75% for nonprofits) with terms up to 30 years. Unfortunately, EIDL forgiveness is not possible, but small businesses can defer repayment for 18 months for loans made in 2021, and there is no penalty for prepayment. Applying for an EIDL loan is similar to applying for many traditional small business loans, which can mean a lengthy application process depending on how much your business wants to borrow. For example, loans over $25,001 require a UCC-1 security agreement, and loans over $200,000 also require a personal guaranty from all individuals or entities owning 20% or more of the business applying.
For an update on EIDL, see the SBA website for more information.
Alternative Options
In addition to the PPP loan program and EIDL, many other funding options are still available to small businesses looking to grow or pad their emergency funds. The SBA’s Restaurant Revitalization Fund, 7(a), 504, and Microloan programs are all worth investigating, along with the numerous small business grants provided by federal, state, and city organizations.
Another option is to obtain a small business line of credit. A line of credit is a revolving business loan that allows the borrower to draw money when needed. Most businesses use a line of credit as an emergency backup plan for cash flow shortages. Like a credit card, the credit line has a predetermined limit, and fees are only attributed to the amount drawn. When you repay the funds, the fees are zero until the next draw.
Although some lenders require personal guarantees for lines of credit, Financing Solutions does not.
With the Financing Solutions Line of Credit, you also have the benefits of an easier application process:
- There are no costs to set it up or keep it in place
- The easy 2-minute application online application
- If approved, you’ll receive a same-day, no-obligation offer letter
- The fastest setup, 48-72 hours
- Once you have the line of credit, requests for funds are wired to your bank in minutes
- You can use your line of credit whenever needed
- Inexpensive when used (low fees)
- There are no restrictions in place or collateral required
- No personal guarantee is required, either
- Financing Solutions is a leading provider of lines of credit
- We are a reputable company with an A+ & 5-star rating
- You can pay off the line whenever you are ready
- The credit line is easy to renew and renews yearly
- You have a secured account portal access 24 x 7
As the economy still struggles to recover, many small businesses continue to look for relief monies or create an emergency backup fund. If you want to see if your business would be approved and for how much, please feel free to fill out the no-obligation, 2-minute line of credit application here.
