PPP Round 2: What Downtown Small Business Owners Need To Know

by Fara Illich
Business Development Community Featured Fara Illich January 11, 2021

 For small businesses impacted by the COVID-19 pandemic, Monday, Jan. 11 is the first day to apply for a new, potentially forgivable federal loan.

The federal government officially reopened the second round of the Paycheck Protection Program (PPP) with a fresh set of guidelines aimed at getting cash in the hands of small businesses that need it most.

Administered through the U.S. Small Business Administration (SBA), the $284 billion pandemic aid program allows lenders to distribute loans on behalf of the government. The loans can be forgiven as long as the money is spent on eligible costs such as payroll, rent and certain operating expenses.

Some of the big changes

At least $15 billion is set aside for first-time borrowers with a maximum of 10 employees or loans of $250,000 or less for eligible borrowers in low- or moderate-income neighborhoods.

To promote access for smaller lenders and their customers, the SBA is only accepting loan applications from community financial institutions starting on Jan. 11. The PPP will open to other participating lenders soon.

What is a community financial institution?

Community financial institutions (CFIs) are geared toward low-income or other economically-disadvantaged individuals. There are only a handful of CFIs in the state of Arizona, and they comprise roughly 10 percent of all PPP-eligible lenders nationwide.

In the coming days and weeks, additional banks, credit unions and lenders will be able to submit first and second draw PPP loan applications.

Not sure if you use a CFI? Check with your bank or click here for a categorized list of PPP-eligible lenders in Arizona.

Who can apply and when?

Borrowers who did not receive a loan before the program closed in August 2020 can begin submitting applications on Monday, Jan. 11 through a participating CFI. Considered a “first draw” loan, these are limited to businesses with a maximum of 500 employees that have been in operation since Feb. 15, 2020.

Download first-draw application forms here.

A “second draw” loan is for borrowers that previously received a PPP loan in 2020, generally have 300 employees or less, and can demonstrate a revenue reduction of 25 percent or greater in 2020 relative to 2019. Those borrowers can begin submitting applications through a CFI on Wednesday, Jan. 13.

Download second-draw application forms here.

When’s the deadline to apply?

Borrowers can apply for a a first or second draw PPP loan until March 31, 2021 through a SBA-approved lender.

How much can a business borrow?

Loans are capped at 2.5 times an applicant’s average monthly payroll costs in the year prior to the loan being issued. For restaurants and other eligible hospitality-industry businesses, the amount is 3.5 times the average monthly payroll.

The maximum loan amount is $10 million for first-time borrowers and $2 million for second-time PPP borrowers.

How to receive full forgiveness for the loan?

The loan is fully forgivable for businesses that spend at least 60 percent of the proceeds on payroll within the first eight to 24 weeks following fund disbursement. But employee compensation levels must be maintained.

Funds can 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.

More questions?

If you are a Downtown Phoenix small business with questions about the PPP loan, contact Sara Scoville-Weaver, senior business development manager with the Downtown Phoenix Partnership at sscovilleweaver@dtphx.org or 602-744-6408.

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