If your business’s finances have suffered as a result of mandatory shutdowns and stay-at-home orders, you may qualify for a Paycheck Protection Program (PPP) loan. As of December 27, 2020, Congress has approved additional funds for the PPP until May 31, 2021, or until funds run out. Fundbox is no longer accepting PPP applications, however, the SBA can help you find a PPP lender.
PPP loan logistics
The PPP loan gives small businesses and independent contractors money to cover payroll costs for eight weeks from the time they receive funding. The appeal of the PPP loan is that it’s potentially forgivable—meaning you won’t have to pay it back—as long as your business abides by certain criteria.
Here are a few key facts:
- Qualified businesses can receive 2.5 times their average monthly payroll costs up to $10 million
- The interest rate is low, at just 1%
- The loan is potentially forgivable, as long as you use 75% of the money for payroll costs
Learn more about PPP loan eligibility and requirements here.
5 reasons you should apply for the PPP loan now
Consider filling out an application today if:
1. You need financial aid for your business
If your business’s revenue has declined due to closures or decreased customer demand, the PPP loan could help you save money and protect your employees. Not only can you potentially keep all your employees on payroll—or replace your compensation if you’re a sole proprietor—you’ll also get help covering your mortgage, rent, utilities.
This is an uncertain time, but having funding can help you weather the slower periods and keep your team intact as the economy gradually begins to reopen.
2. Your business is still open and operating to some capacity
Many businesses have been forced to close during the past couple of months, but some businesses are still open, even if they’re working at a reduced capacity. If your business is essential or if you’re still operating to some degree, you may be in a better position to remain open and slowly build up your revenue until it’s back to normal.
In the meantime, the PPP loan could give you the cash flow flexibility necessary to continue serving customers. Putting the loan money toward payroll expenses, rent, and utilities gives you the freedom to allocate the revenue you do bring in to other essential costs like inventory and marketing.
3. You have low overhead costs
Because of the PPP’s strict rules around use, the loan may not provide enough financial flexibility to businesses with high overhead costs. However, if your operation has low overhead costs—because you’re an independent contractor, for example, or your staff works virtually— you may be more likely to benefit from the loan’s forgiveness clause.
Say, for instance, that you’re a self-employed graphic designer whose regular costs include a website subscription and Wi-Fi; you may be able to allocate 100% of your PPP funding to your salary compensation and likely get the loan completely forgiven.
4. Your state or county has released guidelines about reopening businesses
States and counties across the country are releasing new guidelines and timelines for reopening businesses. Depending on where you do business, you may have to submit a safety plan to your county for approval, adjust your offerings, serve fewer customers, or rearrange your store or office to satisfy physical distancing requirements.
If your business is eligible for reopening according to your state and county regulations—and you’re prepared to start within the next couple of weeks—getting a PPP loan could help you reopen on the right note. An injection of capital might allow you to bring employees back from furlough, retain your business space, and resume operations with slightly more breathing room for at least the first couple of months.
5. You’ve already applied and haven’t heard back
If you applied for the PPP loan through a bank but had no success, you may be allowed to apply with a different lender. Big banks have been inundated with PPP loan applications; as a result, many banks are prioritizing companies with larger financial needs and neglecting smaller businesses and independent contractors. You’re not allowed to receive more than one PPP loan, so as soon as a lender approves you, your applications elsewhere will be denied.
Disclaimer: Fundbox and its affiliates do not provide financial, legal or accounting advice. This content has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for financial, legal or accounting advice. You should consult your own financial, legal or accounting advisors before engaging in any transaction.
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