Council Post: Paycheck Protection Program: Advice For Business Owners

Partner at Holden Legal Group, a NJ and NYC law firm focused on business and real estate law.

While the Covid-19 vaccine distribution has begun in the United States, restrictions to protect public health are still in place across the country. With no clear end to the pandemic in sight , many small businesses continue to struggle. The pandemic has leveled all sorts of industries and businesses, and assistance is required to keep them going to support the overall economy. 

The federal Small Business Administration (SBA) has opened up a second round of applications for the Paycheck Protection Program (PPP), which is intended to help support small businesses that have seen a decline in profits due to Covid-19. These new loans are more flexible, especially in regard to payroll costs.

Based on my experience advising clients through this process, I have noticed that the second round of PPP is more targeted toward those who are genuinely in need of assistance. This is because it specifically requires that applicants submit needs-based criteria in the form of a quarter-over-quarter decrease in revenue between 2019 and 2020. 

Here are some tips to best present your business to ensure that it aligns with the criteria the SBA has provided for qualification.

Check The Basics

The Small Business Administration has specific outlines a business must fit to qualify for a PPP loan. First, it must have been in business on or before February 15, 2020, and have a maximum of 300 employees. 

Then, every small business owner needs to ask, “Am I in need?” While most have seen a decline in profits, some businesses have conversely seen an uptick in demand due to the unique conditions of the pandemic. To apply for a PPP loan, a business owner must demonstrate that they are in need of aid from the federal government in quantitative terms. They must show that their business has seen at least a 25% decrease in revenue in at least one quarter in 2020, compared to the same quarter in 2019. 

Preferred Industries

As described above, PPP will be necessary for businesses that have clearly struggled as a result of the conditions of the Covid-19 pandemic. While some small business owners have been able to adapt their product or service to an online or socially distanced format, others cannot. For instance, recreational businesses like movie theaters, bowling alleys, sports complexes, amusement parks and batting cages do not have an online alternative. Similarly, consumer or travel-driven businesses like restaurants or entertainment venues have few options. However, these highlights are by no means exhaustive. Thousands of industries have been hit hard by the pandemic, and as long as the quantitative data illustrates a decline, a business will qualify.

Minority-owned businesses will likely receive a first look by the SBA. They were not given a large amount of funding during the first round of PPP loans and are an important subset to support. 

Loan Uses And Forgiveness

Once a small business is approved for a PPP loan, it is crucial to follow the guidelines for use because 100% of the loan could be forgiven if used appropriately. While the first round of PPP loans was somewhat restrictive in usage, this round was purposefully relaxed to allow businesses more productive use of the loan. For instance, the language explicitly states that the following are eligible expenses:

• Payroll costs.

• Mortgage payments.

• Rental payments.

• Utility payments.

• Covered operations expenditures.

• Covered supplier costs.

• Covered worker protection expenditures.

• Covered property damage costs.

Tips For Preparing Your Application

I would recommend submitting your application as soon as possible, especially if you are in need. This is because funds are limited; you do not want to jeopardize your funding. If your application is approved, it is important to effectively leverage these funds on business expenses vital to the operations of the organization. This will ensure that you receive maximum value from the PPP loan and increase the likelihood of the loan being forgiven. 

Full information regarding the details of PPP loan forgiveness can be found online. I recommend thoroughly reading the guidelines.

The Road To Recovery

The SBA’s steps toward assisting small businesses should be a relief to many. Along with PPP loans and the continuation of vaccine distribution, small businesses will hopefully be well on their way to thriving again.

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