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January 28, 2021

Revamped Paycheck Protection Program opens for first-time borrowers and some lenders

SALISBURY — Aid is on the way for businesses who are still dealing with the impact of the COVID-19 pandemic as the Paycheck Protection Program reopened on Monday for some first time-borrowers.

The program, which is administered by the Small Business Administration, will give underserved business owners a head start by opening the application process several days early for applications made through Community Financial Institutions that fall within one of these categories: Community Development Financial Institutions, Minority Depository Institutions, Certified Development Companies and Micro-loan Intermediaries.

These lenders, which are typically dedicated to serving low-income or minority communities, made up approximately 10% of all PPP participating lenders in 2020, according to the SBA.

On Wednesday, those same lenders can submit applications from existing PPP borrowers who are applying for a second-draw loan.

The SBA announced that additional lenders will be able to submit first and second draw PPP loan applications “a few days later.” The program will remain open until March 31.

Congress revived the PPP as a part of a $900 million COVID-19 relief package that was signed into law by President Donald Trump on Dec. 27. The bill set aside $284 billion specifically for the revamped PPP program.

PPP was first established by the CARES Act in March and provided 5.2 million loans worth $525 billion to America’s businesses before closing in August. Those loans were used to cover payroll costs and other business expenses.

Many Rowan County businesses relied on forgivable PPP loans to stay afloat during 2020. A total of 15,822 jobs were supported or retained and 1,500 businesses in Rowan County and Kannapolis received funding from the Paycheck Protection Program.

One local business that benefited from the program was The Forum. Matthew Marsh, who co-owns the longtime Salisbury gym with Steve Safrit, said that The Forum will likely reapply for a second PPP loan when it is available to them.

The first loan, Marsh said, was a major boost to the gym when it reopened for business after being closed for several months. Marsh relied on Gary Davis, CPA, and First National Bank for applying for the PPP loan. He said that it was a relatively smooth and good process. The Forum exhausted the loan it received from its first draw.

Although the gym has been open for months, it’s operating at a reduced capacity and has had to cut three hours out of its daily operations to comply with Gov. Roy Cooper’s curfew. A second PPP loan, Marsh said, could help the gym take its business “a step further.” 

“It would kind of get the staffing and everything back up to the level we need it to,” Marsh said. “Right now, with the curfews and everything, it’s cut our hours. We’d definitely put it back of course into our business with the staffing and personnel issue, getting everybody back on track with the payroll.”

A business is generally eligible for a second draw of a PPP loan if they meet the following criteria:

  • 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
  • Can demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020

There have been several updates made to the new round of PPP funding — many of which are aimed at getting the loans in the hands of small, underserved or minority businesses. A complaint about the first round of PPP was that too many loans ended up benefitting large companies, and not small businesses. In the rules for the new round of the program, $15 billion has been earmarked for lenders with less than $1 billion in assets and another $15 billion for those with less than $10 billion in assets.

Several other key PPP updates include:

  • 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.
  • PPP loans will cover additional expenses, including operations expenditures, property damage costs, supplier costs and worker protection expenditures.
  • The program’s eligibility is expanded to include 501(c)(6)s, housing cooperatives, direct marketing organizations, among other types of organizations.
  • The PPP provides greater flexibility for seasonal employees.
  • Certain existing PPP borrowers can request to modify their first draw PPP loan amount.
  • Certain existing PPP borrowers are now eligible to apply for a second draw PPP loan.

First-time applicants will generally follow the same rules that applied to the program previously.

To apply for a forgivable PPP loan, businesses need to contact a local lender. A list of participating lenders can be found online at www.sba.gov. The SBA has also introduced an online lender matching tool aimed at helping borrowers find small lenders who traditionally serve underserved communities.

For more information on SBA’s assistance to small businesses, visit sba.gov/ppp or treasury.gov/cares.

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