The latest $900 Billion coronavirus relief and stimulus package was recently signed to provide more PPP funds to small business owners that are still affected by COVID-19 and have exhausted their initial loan. This package is an extension of the Paycheck Protection Program from March 2020, providing another roughly $284 Billion in forgivable loans.

Congress has made a few changes to this relief package, including PPP loan forgiveness, eligibility for PPP loans, and loan amounts. Additional changes were also made to Economic Injury Disaster Loans, the Employee Retention Tax Credit, a Venue Grant program, and SBA loan programs. Small Business Administration has ten days to implement new rules for the bill.

How can my business receive a PPP loan?

There are a few changes to eligibility to this stimulus package from the last. An applicant has between eight and 24 weeks to use the PPP funds. At least 60% of the loan must go towards payroll expenses. The rest is for expenses like rent and utilities. Payroll costs are payments to employees that include:

  • Salary, wage, or commission.
  • Vacation, tips, medical, sick, parental, or family pay.

  • Group healthcare benefits, including insurance premiums.
  • Employer-provided group insurance benefits (life, disability, vision, and dental).

  • Retirement benefits.
  • State or local tax on employee compensation.

Eligible applicants must have no more than 300 employees, instead of 500 or fewer employees in the last stimulus package. A business must also demonstrate they have had a 25% drop in revenues from Q4 of 2019 to Q4 of 2020. New PP loans cap at $2 Million, instead of $10 Million.

Other changes to the bill include expanding covered expenses. These expenses include remote-work software for employed individuals to work remotely, equipment for social-distancing requirements and government-mandated sanitation, and property damage caused due to public disturbances that occurred in 2020.

The average monthly payroll costs determine loan amounts during the 12 months prior to receiving the loan multiplied by 2.5 (or 3.5 for the food and accommodation industry), capping at $2 Million. SBA opens the program until March 31, 2021, or until all funds have been exhausted. Businesses are eligible to apply for a PPP loan again if they exhausted their first one and meet all new qualifications.

Will a new PPP loan affect my loan forgiveness application?

The loan forgiveness process is much easier for loans under $150,000. If your business gets more than $150,000, it shouldn’t affect it at all. The new bill simplifies businesses that received less than $150,000 by only requiring a description of how much of the loan was spent on payroll, how many employees the business was able to keep as a result of the loan, and the total amount of the PPP loans. Businesses don’t need to submit documentation supporting their claims as part of their loan forgiveness application.

Expenses eligible for forgiveness were expanding to include group insurance, worker protections, property damage, essential supplier costs, and operating expenses. Operating expenses include software and cloud computing services, account needs for business operations, and human resource software. Businesses with existing PPP loans can use the new expenses for forgiveness.

What if my business needs more than the PPP loan?

Many businesses and sole proprietors find that the PPP loan isn’t enough, or they no longer qualify. It may be difficult to obtain additional loans through traditional lenders such as banks, in addition to a PPP loan. The approval process is lengthy and not guaranteed, and taking on more loans might not be the best financial decision for your business. An excellent solution for businesses needing additional financial help is through Accounts Receivable Financing and Asset-Based Lending.

Accounts receivable financing is beneficial for businesses that operate in the B2B space with clear repayment terms. It is the process of turning unpaid invoices into immediate cash to maintain liquidity and continue business operations. A business incurs no additional debt; you are simply gaining access to your working capital. A business can apply for and receive funds in as little as one business day. Accounts receivable financing improves a business’s cash flow, provides a business with fast access to cash, and there’s a hassle-free approval process.

Asset-based lending works slightly differently by securing a line of credit or loan with assets for collateral. Collateral includes inventory, accounts receivables, equipment, or other property the business owns. The credit line helps cover additional expenses that aren’t covered by PPP loan forgiveness, especially when there is a delay in payments on invoices. A business must show enough cash flow or cash assets to cover the loan to be approved.

Porter Capital is a leading provider of accounts receivable financing and asset-based lending solutions for businesses nationwide. We can assist you in getting additional funding if your business needs more than your current PPP loan, or if you don’t qualify for the second stimulus package. Get in touch with us today for a free business consultation.