Nearly one year after the launch of the SBA’s Paycheck Protection Program (PPP), many small business owners are still struggling to access the financial aid needed to stay afloat. The complexity of the program’s forms, requirements and rule changes has created barriers for small business owners, who may not have access to a knowledgeable source. However, the federal government recently tweaked the rules to make it easier for small businesses to qualify. Stephen Klein, BT Partner and leader of the firm’s Bankruptcy & Restructuring practice recently spoke with the Atlanta Journal-Constitution about these newly adjusted PPP rules and how these changes will help more small businesses receive the aid they need.
The Small Business Administration’s new rule changed the financial metric used to determine if a small business qualifies for the program, said Klein. Last year, a business did not have to demonstrate any decline in revenues. For first draw PPP loans, as well as second draw PPP loans, borrowers must make a good faith declaration that the proceeds are necessary for the ongoing operations of the business. For second draw PPP loans, businesses and individuals must demonstrate a 25% decline in gross revenue for a quarter in 2020 versus the same quarter in 2019 in order to qualify.
Another major change was aimed specifically at independent contractors (Schedule “C” filers) and the new rules allow those borrowers to use Gross Revenues versus net profit, subject to the limitation of $20,833 ($100,000 of annualized revenues) consistent with other business owners. The Biden administration also limited PPP applications for a two-week period in February and March, allowing only businesses with fewer than 20 employees to apply.
To learn more about how these changes expand PPP loan eligibility to a broader group of businesses, read the full article here.