Update Feb. 22, 2021: Only businesses with no more than 20 employees will be able to submit PPP applications from Feb. 24 through March 9. This move is part of a wider revamp of the Paycheck Protection Program announced by the Biden administration.
Additional changes include lifting restrictions on business owners with delinquent federal student loans, as well as those who have non-fraud felony convictions. The administration will also rework the loan calculation formula for self-employed individuals, allowing sole proprietors and independent contractors to qualify for more money than previously allowed. For the latest information, read our PPP page.
The Small Business Administration is trying to level the playing field for underserved business owners, who were largely shut out during the early days of the Paycheck Protection Program’s previous rounds.
Congress set aside $15 billion for first and second-draw PPP loans issued by community financial institutions, which typically serve minority-, women- and veteran-owned businesses. Additional funding was designated for business owners in low- or moderate-income neighborhoods receiving loans less than $250,000.
Still, borrowers need to move quickly — the deadline to apply is March 31, 2021 — and be able to prove that they qualify for a PPP loan. These tips will help you do just that:
1. Contact your lender — now
Reach out to your lender immediately and let it know you intend to apply, whether for an initial PPP loan or second-draw loan. It can let you know if it's participating and clue you in to the forms and documentation you’ll need.
“The best advice I can give people is to act fast,” says Mrinalini Jayashankar, an attorney and owner of MJ Law Firm in Tennessee. “I've already contacted the lender I worked with in round one and let her know that I intend to apply for round two.”
2. Use a community financial institution
Seek out a local community bank for your PPP loan, especially if your lender isn’t participating or you typically work with a large national bank.
Borrowers applying through community financial institutions get first dibs at PPP funds this time around. That includes applications from community development financial institutions, minority depository institutions, certified development companies and microloan intermediaries.
You can use this tool from the Opportunity Finance Network to find a community development financial institution in your area.
3. Build your case
To qualify for a second PPP loan, you need to prove your business lost 25% in annual gross receipts or in one quarter of 2020 compared with the same quarter in 2019. Lenders aren’t going to simply take your word for it; you’ll need to provide documentation to back it up (unless you’re seeking a loan for less than $150,000). Gather quarterly financial statements, bank statements and any relevant tax forms to show you qualify.
For first-time and second-draw loans, you'll need to prove your total payroll costs, which include any employer-paid insurance and retirement benefits, for either calendar year 2019, 2020 or the 12 months prior to the loan. Run the numbers for each scenario. You don’t want to leave money on the table by undercalculating your payroll.
4. Leverage your business network
Tap your banker, your lawyer, your payroll company, your accountant — anyone who knows you and your business. These connections can help you prep your loan application, collect the required documentation and work through any issues that arise.
5. Ask for help
Don’t hesitate to ask for assistance if you run into roadblocks. Find a Small Business Development Center in your area or reach out to an organization like SCORE, a nonprofit that mentors business owners. Many organizations are offering free online training sessions for business owners.
“[With] webinars and seminars, there are no boundaries,” says Janie Barrera, CEO of LiftFund, a community development financial institution. That means business owners can get help from virtually anywhere. “The rules are the same whether you’re in Texas or Washington state. Look up webinars out there that will walk you through the application.”
6. Apply with multiple lenders
You can and should submit more than one application for your PPP loan. That way you’re not starting from zero if you learn a lender is working only with existing customers, for example. In addition to contacting local banks in your area, you should apply with any institutions that are accepting new customers. Just be sure to withdraw any outstanding applications once you are approved for a PPP loan.