Good news for minority-owned small business has arrived with a new round of pandemic relief funding for the Paycheck Protection Program and Economic Injury Disaster Loans. Congress has approved $284 billion in new loans. Availability started Monday, January 11, 2021, for first-time borrowers and will start on Wednesday, January 13, 2021, for second-time PPP borrowers. The PPP loan will be available through March 31, 2021, or until funding is exhausted. Many of the rules around forgiveness and tax deductions have been clarified and the funding is expected to be given out faster.
What is different this time? The Small Business Administration has taken steps to ensure the hardest-hit communities get an opportunity to stand in line first. Small Business Administration (SBA) Administrator Jovita Carranza said the new “guidance builds on the success of the program and adapts to the changing needs of small business owners by providing targeted relief and a simpler forgiveness process to ensure their path to recovery.”
The Paycheck Protection Program is a loan program designed to give a direct incentive for small businesses to keep their workers on the payroll. SBA will forgive loans if all employee retention criteria are met and the funds are used for eligible expenses.
Here is what you need to know to prepare for your pandemic relief:
About the PPP Loan:
- PPP loans have an interest rate of 1%.
- Loans issued prior to June 5 have a maturity of two years. Loans issued after June 5 have a maturity of five years.
- Loan payments will be deferred for borrowers who apply for loan forgiveness until SBA remits the borrower’s loan forgiveness amount to the lender. If a borrower does not apply for loan forgiveness, payments are deferred 10 months after the end of the covered period for the borrower’s loan forgiveness (either eight weeks or 24 weeks).
- No collateral or personal guarantees are required.
- Neither the government nor lenders will charge small businesses any fees.
How to Apply
You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program. Each lender has a responsibility to explain the forgiveness process, so make sure to ask questions if you do not understand.
Do yourself a favor by taking a look at the loan forms first. If you wish to begin preparing your application, you can download the following PPP borrower application forms to see the information that will be requested from you when you apply with a lender:
Paycheck Protection Program First Draw Borrower Application Form (revised 01-08-21)
Paycheck Protection Program Second Draw Borrower Application Form (01-08-21)
Next Steps
If you are a minority-owned business, take advantage of this program before the funds run out again. Here is what you can do to make the most of the program.
- Learn about the program updates. There are many dedicated small-business centers and organizations offering free support and webinars. Check out azcommerce.com for more details and explore learning tools at www.caresactaz.com.
- Know what your covered period will be. Your covered period is the period of time you will use the funds. PPP borrowers can set their PPP loan’s covered period to be any length between eight and 24 weeks to best meet their business needs.
- Know how you will use the funding. PPP loans will cover additional expenses, including operations expenditures, property damage costs, supplier costs and worker protection expenditures.
- Know who your covered employees are. The PPP now provides greater flexibility for seasonal employees.
- Know how much you will need. Take some time to calculate how much funding you will need and be ready to provide supporting documentation. Certain existing PPP borrowers can request to modify their First Draw PPP Loan amount and certain existing PPP borrowers are now eligible to apply for a Second Draw PPP Loan.
- Make sure you qualify for a Second Draw PPP Loan. To qualify, you must have received a First Draw PPP Loan and will use or have used the full amount for authorized uses, have no more than 300 employees, and can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.
- Consider the Economic Injury Disaster Loan (EIDL) Advance Grant #2. The new program received $20 billion in available funding, reopening the $10,000 EIDL Advance grant for businesses that received less than $10,000 from the initial grant to receive the difference from their previous grant total.
Find a Community Lender and Local Assistance
If this is your first time applying for a loan, reach out to community lenders in your area. There are several that have been tapped to provide every effort to get this funding in the hands of small business, like Chicanos Por La Causa: Prestamos CDFI. Make sure you are applying at a Community Development Financial Institution, Minority Depository Institution, certified development company or microlender intermediary. In addition to finding them online, the SBA offers a Lender Match program that can match you with smaller lenders who can aid traditionally underserved communities. You can also ask a local SBA district office for assistance.
If we learned anything from the first round of pandemic relief, it was to not delay in applying! Take advantage of this program while it exists and share this news with your colleagues. We are all in this together.
EDGAR RAFAEL OLIVO is a bilingual business educator, economic advisor and contributor for several media outlets. He’s a nonprofit executive who is passionate about education. He is certified in finance and data analytics and holds a business degree from Arizona State University.
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