February 7, 2023


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PPP loan approvals to resume Monday for some small firms, nonprofits

The Paycheck Protection Program will resume Monday with federal officials starting to approve applications for the forgivable loans submitted by banks and other private lenders.

The U.S. Small Business Administration, which oversees the coronavirus-relief program, said it will initially review only applications from businesses and nonprofits in low-income neighborhoods. Among these groups, first-time borrowers will be considered starting Monday followed by those seeking second PPP loans, starting Wednesday.

“To promote access to capital, initially only community financial institutions will be able to make loans,” SBA officials said last week. “The PPP will open to all participating lenders shortly thereafter.”

All borrowers have until March 31 to secure their first or second PPP loan. Up to $35 billion in federal loan guarantees are available for first-time borrowers. The bulk of the second PPP program, which totals $285 billion in guarantees, is for borrowers who are seeking a second loan.

The first PPP round closed on Aug. 8 with more than $134 billion in unused loan guarantees, which were reauthorized by Congress and President Donald Trump last month. More than 64,500 PPP loans were made in Nassau and Suffolk counties during the program’s first phase, according to SBA.

Loans are made by banks and other private lenders subject to SBA’s approval. They carry a 1{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} interest rate and five-year term.

All borrowers must have been operating on or before Feb. 5, 2020.

First-time borrowers must have 500 or fewer employees. Borrowers seeking a second PPP loan must have 300 or fewer employees, have exhausted their first PPP loan and show revenue losses of 25{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} or more last year compared with 2019, according to SBA and Department of Treasury regulations released Jan. 6.

Chris Hurn, CEO of Fountainhead Commercial Capital, a nonbank lender in Florida, said last week that while borrowers wait for the loan approval process to resume, “the best thing that [they] can do is verify they qualify for a second-draw PPP loan: They have 300 or less employees and can certify a 25{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} revenue reduction.”

Matt Coleman, a spokesman for SBA’s Region II, which includes New York State, said the agency “is committed to ensuring” the PPP restarts “as quickly as possible to deliver critical economic aid to small businesses on Long Island and throughout the nation.”

He said borrowers should “speak with their lender and utilize SBA’s free resource partner network to help prepare for the program’s relaunch.” On Long Island, the network includes the Small Business Development Centers at Farmingdale State College and Stony Brook University and the Service Corps of Retired Executives, or SCORE.

The new regulations, which cover 127 pages, have raised questions about PPP loans.

Q: What’s the maximum amount of a second PPP loan?

$2 million

Q: Are the eligibility requirements for a second PPP loan different?

Yes. Besides having to show a 2020 revenue loss of 25{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} or more, borrowers cannot have more than 300 employees per location.

Q: My PPP loan was forgiven in 2020; how do I account for it in determining my 2020 revenue loss?

The loan forgiveness amount should be excluded from your loss calculation.

Q: Is collateral required?

No. Like the first PPP loan, the second PPP loan doesn’t require collateral or a personal guarantee.

Q: What if I haven’t used all the money from my first PPP loan?

You can apply for a second PPP loan, but you won’t receive the money until the first loan has been exhausted, and that must happen before March 31 to get the second loan.

Q: How much time do I have to use up the second PPP loan?

Borrowers can select any length of time between eight weeks and 24 weeks.

Q: Can I use the PPP money to pay for more expenses than in the past?

Yes. Property damage costs, supplier costs, worker protection expenditures and other operations costs may now be paid with PPP funds.

Q: Are some of the federal loan guarantees reserved for businesses in poor communities?

Yes. Loan guarantees have been set aside for businesses in low-income neighborhoods with 10 or fewer employees or loans of less than $250,000.

Q: I own a restaurant but didn’t receive a PPP loan. Am I eligible for the larger loan amount now offered to restaurants?

No. The larger loan amount for restaurants, hotels and other hospitality businesses — 3.5 times their monthly payroll expenses compared with 2.5 times for other borrowers — is only available to second-loan borrowers.