New PPP borrowers get first nibble starting Monday
Photo | HBJ File
David Rotatori, CEO of Naugatuck-based Ion Bank, which applied for PPP loan forgiveness on behalf of borrowers in early rounds of funding.
First-time borrowers using community lenders will have first dibs, starting Monday, on a fresh infusion of $285 million in funding into the federal Paycheck Protection Program.
The U.S. Small Business Administration has officially reopened the application window for the third round of PPP assistance since Congress created the program early last spring in response to the COVID-19 pandemic.
Starting Wednesday, employers who received PPP loans during the first two rounds will be able to apply for a second loan, so long as they are also using a community financial institution. SBA said larger commercial lenders will be able to submit borrower applicants soon after that.
The new round of funding comes from the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, signed into law by President Donald Trump on Dec. 27, extending SBA guarantees for PPP loans through March 31.
That recent law keeps many of the existing parameters for the PPP program, which distributed $525 billion to more than 5.2 million nationwide during 2020.
Many of the terms remain the same, such as the 1% interest rate for loans that are not ultimately forgiven. PPP remains focused on maintaining borrowers’ employee and compensation levels. Borrowers must still spend 60% of any new PPP loan dollars on payroll costs to qualify for forgiveness.
The remainder can still be used for such expenses as mortgage interest and utilities, but Congress added several other qualified costs, such as supplier costs, worker protection expenditures, and uninsured property damage from looting or vandalism during 2020.
Restaurants, hotels and certain other businesses receive some added priority in the third round of PPP funding.
For example, those employers’ maximum PPP loan size will be 3.5 times their average monthly payroll, rather than 2.5 times for other borrowers. Those businesses can also exceed the 500-employee cap for the round of first-time loans (second-draw borrowers are limited to 300 or fewer employees and must also be able to show a 25% or greater decline in quarterly revenue between 2019 and 2020).
In addition, at least $15 billion of the new $285 million tranche of funding is set aside for first-time borrowers with 10 or fewer employees, and for loans of $250,000 or less to borrowers in low and moderate-income neighborhoods.
The MetroHartford Alliance and Hartford-based accounting firm Whittlesey are hosting a webinar on Tuesday about the new round of PPP funding.
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