Small Business Relief: Paycheck Protection Program (PPP)
Updated: Feb 8, 2021
Marked as the most severe economic contraction since the Great Depression, it’s no surprise that the Covid-19 Pandemic has caused great hardship on our nation’s businesses. With the cost of over one million lives worldwide and ensuing lockdowns, 2020 was an intense and volatile year. Fortunately in Alaska, with decreases in daily case numbers and the lift of many Emergency Order restrictions, 2021 has provided some light during this dark time.
As policy support has always driven economic recovery, under the Biden Administration, we will likely continue to see it do so. After an eight-month race to provide relief to Americans, Congress passed a $900 billon COVID-relief and $1.4 trillion government funding package that gives critical pandemic aid to Americans. In partnership with the U.S. Small Business Administration (SBA), this subsequent legislation established several new temporary programs for small businesses to address the COVID-19 outbreak; one of the most popular programs being the Paycheck Protection Program (PPP).
(According to FederalPay data, Alaska has a total of 12,041 businesses that received Paycheck Protection Program (PPP) loans from the Small Business Administration.)
Alaska’s businesses fighting to keep their doors open have been looking to the PPP for a saving grace. This program, designed to provide a direct incentive for small businesses to keep their workers on payroll, can be used to help fund payroll costs, including benefits, and may also be used to pay for mortgage interest, rent, utilities, worker protection costs related to COVID-19, uninsured property damage costs caused by looting or vandalism during 2020, and certain supplier costs and expenses for operations.
With the subsequent legislation, the PPP applications were categorized as First Draw PPP or Second Draw PPP. What does that mean? In simple terms, the First Draw PPP is meant for first time borrowers and the Second Draw PPP for prior borrowers. The Second Draw PPP allows existing PPP borrowers that did not receive loan forgiveness by December 27, 2020 to reapply for a First Draw PPP Loan if they:
previously returned some or all of their First Draw PPP Loan funds, or
under certain circumstances, request to modify their First Draw PPP Loan amount if they previously did not accept the full amount for which they are eligible
So, times are tough and your business needs financial relief – Where do you start?
1. Determine your eligibility This is the easy part – check below to see if you identify with any of the following:
First Draw PPP
Sole proprietors, independent contractors, and self-employed persons
Any small business concern that meets SBA’s size standards (either the industry size standard or the alternative size standard)
Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans’ organization, or tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:
- 500 employees, or
- That meets the SBA industry size standard if more than 500
Any business with a NAICS code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location
Second Draw PPP
Previously received a First Draw PPP Loan and will or has used the full amount only for authorized uses
Has no more than 300 employees; and
Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020
Are you eligible? If so,
2. Apply at a bank or credit union, preferably your own The demand for these loans is so great right now that a lot of banks, including Northrim and First National Bank of Alaska are prioritizing applications from customers they already do business with. It’s important to note that these loans require no collateral and you don’t have to pay the bank any administrative fees. The government pays the bank 5% of the loan amount (or less, if the loan is over $350,000).
Lender Match is a great resource to help connect you with a lender. You can also view all lenders near you on a map. Once you’ve chosen your lender, you will need to get in touch with the loan officer to get your application started. Banks such as First National Bank Alaska have an easy online portal you can use to submit your application. You can apply for both PPP loans until March 31, 2021.
So, You’ve made it through the application process with your loan officer, and you received your requested PPP Loan. What’s next?
3. Spend the Money You must spend the full loan amount within 8 weeks of the loan being received. The loan must be spent on payroll and other eligible expenses which were listed above.
Once you’ve spent the money, how do you make sure the loan is remised?
4. Apply for loan forgiveness You can apply for loan forgiveness with your loan officer once all loan funds for which you are requesting forgiveness for have been used. In order to receive full loan forgiveness, you must have done the following:
First Draw PPP
Employee and compensation levels are maintained
The loan proceeds are spent on payroll costs and other eligible expenses; and
At least 60 percent of the proceeds are spent on payroll costs
Second Draw PPP
Employee and compensation levels are maintained in the same manner as required for the First Draw PPP loan
The loan proceeds are spent on payroll costs and other eligible expenses; and
At least 60 percent of the proceeds are spent on payroll costs
If you do not apply for forgiveness within 10 months after the last day of the covered period of your loan, your PPP loan payments will no longer be deferred and you will need to begin making payments to your PPP Lender. So, remember to APPLY FOR LOAN FORGIVENESS!
Still confused about the process and find you need some help along the way? Alpine Associates Consulting Group is helping businesses in all industries through the process. From identifying eligibility and compiling all the required documentation for the loan application to applying for loan forgiveness, we’ve been working to help businesses successfully get the relief they need.