The most recent PPP lending guidelines will largely benefit small businesses that are owned by entities in low-income regions and the minorities. The Economic Aid Act enables businesses that have largely been affected by the coronavirus pandemic. Small businesses in this case can access second loans from the program while there are restrictions on the companies that are eligible for the PPP loans. Public companies, for instance, will not manage to get loans meant for small medium enterprises.
With the new guidelines, companies that can apply for the loan can have 300 employees or less. Also, the entities can only qualify for loans worth not more than $20 million across all loans. In the PPP loans round, corporate groups cannot receive more than $4 million. Businesses who had received the first round of PPP loans are now qualified to apply for the second round of loans as per the new guidelines. The rules in the first round will, however, remain effective.
In the changes, struggling businesses in the accommodation and food services industries are also set to benefit. Such businesses can access funding worth 3.5 times of their payroll in the second round of PPP funding. This is contrary to the 2.5 times of payroll for entities in other industries. Businesses in these industries are thought to be highly affected by the coronavirus pandemic.
These new regulations are for restaurants and eateries. These businesses have been largely affected by the second covid-19 wave and the new restrictions, especially during the festive season that serve as the peak of the businesses. The SBA has reviewed the rules that protect the PPP funding from fraud. It is now mandatory for those who apply for PPP funding to submit the documents listed below to give evidence of a 25% or more 2020 reduction in revenue:
• Income statements for every quarter
• 2019 tax returns
• Bank statements
Business owners are expected to produce the following additional documents:
• Summary report of the payroll
• Payroll tax filings for each quarter applicable
• Personal identity documents including a driver’s license or passport for principals
Through a released statement, the SBA Administrator said that the agency is committed to ensuring adequate support for small underserved business entities. The administrator announced a first lending segment for small lender including Fintech lenders.
$15 billion has been set aside for lenders who have assets worth less than $1 billion. There is also $15 billion that has been set aside for lending institutions who have assets worth less than $10 billion. The lenders are required to offer incentives as a motivation for banks and lenders to make small loans. It had been noted earlier that big banks were more comfortable working with larger companies that they have had a long relationship with.
With this new law, the gaps that existed in the previous legislation in terms of taxation, fraud and other issues, have been taken care of. Lenders will also have their charges for approving PPP loans increased. This move aims at encouraging entities to apply for small loans and this is convenient for small businesses, especially in areas that are under-served.