The Paycheck Protection Program, which assists small businesses in retaining their staff during the COVID-19 pandemic, was restarted by the United States Small Business Administration (SBA), and will be available for businesses until March 31 to apply for through qualifying lenders.
Because this program is targeted at small establishments, only businesses with less than 500 employees are able to apply. This also includes those who are self-employed, sole proprietors, independent contractors.
However, those who meet the SBA’s small business size standards are also qualified to apply for the loan. Depending on the industry, this allows for businesses with as many as 1,500 employees to apply. More information on SBA size standards can be found on their website at https://www.sba.gov/document/support–table-size-standards.
The original implementation of the program earlier this year was met with great reception around the country, and Culver City was no exception. Of the 5,212,128 approved loans, over 1,800 went to businesses in Culver City, ranging from $205 to between $2.5 million and $5 million (exact amounts for loans over $150,000 were not disclosed by the SBA).
The program was created as an incentive for businesses to retain their employee base, providing 100% loan forgiveness given that the following criteria regarding employee retention is met:
- Employee and compensation levels are maintained
- The loan proceeds are spent on payroll costs and other eligible expenses; and
- At least 60 percent of the proceeds are spent on payroll costs
There will also be a second draw program for those who have already applied and used the money from the program’s previous implementation. While the second draw will initially favor community development financial institutions (CDFI), as well as lenders with under $1 billion in assets.
There are over 5,000 institutions nationwide that fall under this criterion. The SBA has set up a Lender Match web portal for businesses to find a lender that works for them.
At least $25 billion is being set aside for Second Draw PPP Loans to eligible borrowers with a maximum of 10 employees or for loans of $250,000 or less to eligible borrowers in low or moderate income neighborhoods.
Borrowers are qualified if they prove the following:
- The borrower previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses
- The borrower has no more than 300 employees; and
- The borrower has suffered at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.
Similar to the first draw loan, those taking out a second draw loan can qualify for loan forgiveness assuming the usage of their loans meets the same criteria as the first draw loan.