The Paycheck Protection Program (PPP) was created to help assist small businesses during the ongoing pandemic. The primary function of the PPP loans offered is to help small businesses continue paying their employees through the pandemic, even when they cannot physically work. At present, the deadline to apply for a PPP loan has been extended to August 8.
Original PPP Loan
Instated on April 10 of this year, the original PPP loan program featured some strict requirements to determine eligibility, including the business industry and economic need. The loan could be provided for up to 2.5 times the monthly payroll amount, as the loans were primarily geared toward supplementing these costs. In addition to payroll, businesses could use a PPP loan to pay for rent, mortgage interest, utilities, benefits, and other related debt. Provided that at least 60% of the loan was used for payroll, businesses could qualify for loan forgiveness.
PPL Loan Updates
Preceding the extension of the application deadline, signed into effect on July 4, was a new set of rules from the Small Business Association (SBA), which clarified some issues and also attempted to make loan forgiveness possible for more businesses. The changes issued by the SBA included clarification on when to apply for loan forgiveness as well as what the process is for doing so and the reality of how likely an audit on individual PPP loans is.
What the Futures Holds for PPP Loans
The extension of the PPP loan application window is believed to be a sort of buffer as members of the federal government deliberate over potential changes to the existing relief programs and the potential for replacement efforts. This second round of COVID-19 relief, should it pass, will likely feature more targeted relief for small businesses beyond the PPP loans.
Many small business owners may wonder how they will pay back their loans, especially if the business does not resume as usual anytime soon. Business owners may submit a forgiveness form that enables them to be considered for loan forgiveness, effectively making the PPP loan a grant that does not need to be repaid. Failing to submit one of these forms will result in the business owner having to pay back the loan in full.