Are PPP Loans Still Available for Small Businesses? - 2023

Are PPP Loans Still Available in 2023?

Unfortunately, Paycheck Protection Program (PPP) loans are no longer available in 2023. The eligibility for this program officially ended in May 2021, and since then, there have been no indications of the program's return.

A Brief Review of the Paycheck Protection Program

The primary purpose of the Paycheck Protection Program (PPP) was to prevent massive unemployment during the COVID-19 pandemic.Throughout the crisis, small businesses have been able to apply for loans to pay their employees.

How PPP Loans Worked

PPP loans were not tied to credit scores.Lenders only reviewed credit reports occasionally and primarily to confirm applicant information accuracy. The loans were meant to be grants, so repayment was only expected if the funds were used appropriately. The two primary requirements for receiving a PPP loan were demonstrating genuine financial need and utilizing the funds to support business operations and employees.

Tracing the Timeline of the Paycheck Protection Program

The Paycheck Protection Program (PPP) went through three distinct funding rounds before ending. The eligibility for PPP loans concluded on May 31, 2021, more than a year after the first applications were accepted. Borrowers who received loans were given until August 2021 to request forgiveness, provided they met the necessary requirements.

Unlike large U.S. businesses, which hit record highs in 2021, small businesses continue to be shocked by the COVID-19 pandemic. More people are dying from COVID-19 than in 2020, so many consumers are reluctant to leave their homes. Therefore, if small businesses get PPP loans, they are more likely to weather the storm.

The PPP loan funding for all three phases is presented in the table below.

PPP Loan Requirements

First Draw PPP loan

First Draw PPP loans were available for businesses that had yet to receive a Paycheck Protection Program loan. To be eligible, applicants needed to meet the following criteria:

• Own a business with 500 or fewer employees.
• Be in operation on February 15, 2020.
• Demonstrate a need for financial assistance due to the COVID-19 pandemic.

Second Draw PPP Loan

Certain businesses already receiving a Paycheck Protection Program loan were eligible for a Second Draw PPP loan. The requirements included:

• Have 300 or fewer employees.
• Demonstrate a revenue reduction of at least 25% in any quarter of 2020 compared to the same quarter in 2019.
• Have used, or plan to use, the total amount of their First Draw PPP loan on eligible expenses.

Required Certifications for PPP Loans

Whether applying for the first or second PPP loan, the business must meet two conditions: First, it must prove that its operating capital shortage is due to the economic uncertainty caused by the pandemic and is necessary. Second, they must ensure the correct use of loan funds, and the upper limit of non-salary expenses is 40% of the loan amount.

PPP Eligible Entities

The types of eligible entities were the same for both first- and second-draw PPP loans. They included:

• Companies must have operated on February 15, 2020.
• Small businesses with 500 or fewer employees (300 or fewer for second-draw loans).
• "Accommodation or Food Services" businesses, such as hotels and restaurants, can get loans if they have 500 or fewer employees per location (300 or fewer for second-draw loans).
• Independently owned franchises.
• Self-employed workers, independent contractors, gig workers, and sole proprietors.
• Housing cooperatives; eligible section 501(c)(6) organizations, or eligible destination marketing organizations with 300 or fewer employees.
• 501(c)(3) businesses or tax-exempt nonprofit organizations; tax-exempt 501(c)(19) veterans organizations; 31(b)(2)(C) tribal business concerns.
• News organization: majority-owned or controlled by NAICS code 511110 or 5151 business; A nonprofit public broadcasting entity: traded with NAICS 511110 or 5151 business with 500 or fewer employees.

PPP General Terms and Conditions

The Paycheck Protection Program (PPP) loans came with the following general terms and conditions:

• Loans were 100% guaranteed by the federal government.
• No collateral was required from borrowers.
• Personal guarantees were unnecessary.
• PPP loans had a fixed interest rate of 1% and a five-year maturity.

What's PPP Forgiveness?

PPP Forgiveness refers to the process through which borrowers of Paycheck Protection Program loans could have their loans forgiven, meaning they would not need to repay the borrowed amount.Loan forgiveness hinged on the borrower's adherence to program guidelines for using funds.

Forgiveness Terms for the First and Second Draw PPP Loans

To be eligible for total loan forgiveness, First Draw PPP loan recipients had to satisfy certain conditions within the 8- to 24-week covered period after loan disbursement:

• Employee numbers and compensation levels were sustained.
• The loan funds were used for payroll costs and other eligible expenses.
• A minimum of 60% of the funds were allocated to payroll costs.

How and When to Apply for Loan Forgiveness

The borrower can request loan forgiveness when all loan funds have been exhausted. The application deadline is the due date of the loan. Borrowers must make repayments if they fail to apply for loan forgiveness within ten months of the end of the covered period.

To apply for loan forgiveness, follow these steps:

• Determine if your lender is participating in direct forgiveness through the SBA and complete the correct form:

Check the list of lenders participating in direct forgiveness.

• If your lender is participating, use the SBA forgiveness portal to apply.
• If not, apply through your lender, who can provide you with the necessary SBA form or their equivalent.

• Compile your documentation:

Though SBA Form 3508S does not require additional documentation for loan forgiveness amount calculations, the SBA may request information and documents during loan review or audit processes. Gather documentation related to payroll, tax forms, payment receipts, and other relevant non-payroll documents.

• Submit the forgiveness form and documentation:

You can provide the required documentation through your lender or the SBA Direct Forgiveness portal, depending on whether your lender participates in direct forgiveness. Lenders may request additional documentation.

• Monitor your application for forgiveness:

If the SBA reviews your loan, you will be notified of the review and the loan review decision. You have the right to appeal certain SBA loan review decisions. If you received PPP loan forgiveness, your lender will inform you of the amount paid by the SBA and the date of your first payment, if applicable.

If you need assistance with direct forgiveness, contact the SBA at their dedicated forgiveness call center (877-552-2692) or consult their direct forgiveness knowledge base for frequently asked questions.

Some of the Government Funding Options Still Available

While the Paycheck Protection Program has ended, various government funding options are still available for small businesses. Here are a few:

Economic Injury Disaster Loans (EIDLs):

Originally designed to support businesses impacted by natural disasters, EIDLs are now available to businesses with up to 500 employees that can demonstrate financial loss due to the coronavirus pandemic. Eligible businesses can apply for up to $150,000 from the EIDL, depending on the business' six-month working capital. The loan usually carries low interest and can be used to pay the fixed debt and cover operating expenses. However, the EIDL does not offer loan forgiveness, and businesses can apply for a one-year extension of the repayment period if necessary.

COVID-19 Economic Injury Disaster Loans:

The Small Business Administration (SBA) can issue these loans to businesses that experienced losses due to the pandemic. Borrowers can use this loan to cover operating costs, including non-federal and federal debt. The maximum loan limit has been raised to $2 million, and the repayment deferment period has been extended to 24 months. It does not provide forgiveness but provides up to $15,000 in COVID-19 EIDL advances for businesses in low-income communities. If they qualify, there is no need to pay back.

SBA 7(a) Loans: Versatile Assistance for Small Businesses

This common loan program provides financial assistance for small businesses with special requirements. They are partially guaranteed by the Small Business Administration, reducing risk for lenders and making it easier for small businesses to access financing.

SBA loans be used for short- and long-term working capital, refinancing current business debt, or purchasing furniture, fixtures, and supplies.

Loan amount: Up to $5 million, depending on the loan program. (eligibility depends on business type, credit history, and location. )

Pros:

• Competitive interest rates
• Longer repayment terms
• It can be used for various business purposes

Cons:

• Lengthy application process
• Strict eligibility requirements
• May require collateral

Requirements:

• small, profitable business meets SBA's loan criteria
• Carrying on business in the United States or its territories or intending to do so
• have reasonable invested equity
• Explore other funding options before asking for help.
• Prove that the loan is necessary.
• Spend the loan on legitimate business expenses.
• Avoid any outstanding debts to the U.S. government.

Not all businesses are eligible for a 7(a) loan, and they may need to meet other requirements and criteria.

Recent updates waived the upfront guarantee fee for loans under $350,000 until September 2022 and increased the maximum funding amount for SBA Express loans to $500,000.

SBA Express loans provide quicker processing times than standard 7(a) loans. To qualify, businesses generally need good credit, strong revenue, and a few years of operation. Companies affected by the pandemic should develop recovery plans and communicate openly with their bankers.

Local Loan and Grant Programs: Regional and Sector-specific Support

States and cities offer COVID-19 relief programs like Chicago's Creative Worker Assistance Program and the California Rebuilding Fund.

Business owners can explore affordable financing options from Community Development Financial Institutions (CDFIs), which focus on funding traditionally underserved businesses. In addition, they can research local government websites, and reach out to local representatives or industry groups to identify relevant grant and loan programs.

To locate relevant CDFIs, consult the U.S. Department of the Treasury's official list of certified CDFIs.

SVO Grants: Supporting Entertainment and Cultural Industries

The SBA's Shuttered Venue Operators Grants (SVO) are available to theaters, live music venues, museums, zoos, aquariums, talent representatives, producers, and promoters that experienced a minimum 25% revenue decline.

Priority is granted to businesses that experienced a 90% or more significant revenue loss between April and December 2020, followed by those with at least a 70% loss, and then to all other eligible applicants.

Venues can receive up to $10 million. It calculates the maximum grant amount by 45% of a business's 2019 gross revenue or average monthly gross revenue. Businesses can use the grants to pay operating expenses, worker protections, taxes, and debts until February 15, 2020.

Exploring Grant Opportunities for Small Businesses

Grants are valuable funding alternatives for businesses in need, with various federal, state, and local government agencies offering various options. To begin your search for suitable grants, consider contacting your local chamber of commerce, Small Business Development Center, or Economic Development Administration office.

To find grants, search databases like Grants.gov and GrantWatch.com, but apply only to those that fit your business. Libby Hikind, the founder of GrantWatch.com, recommends researching the organization's history of grants and awardees to increase your chances of success.

Generally, grants have specific requirements for the type of business. It may also target specific missions, locations, business types, or demographics, like veterans or minority-owned businesses.

Other Alternatives to PPP Loans for Small Businesses in 2023

Online Lenders

Online lenders offer a fast and convenient way to access funding for small businesses, often with a simpler application process and quicker approval times than traditional banks.

Loan amount: Typically, loan amounts range from $5,000 to $500,000.

Pros:

• Faster approval and funding process
• Easier application process
• Accessible for businesses with less-than-perfect credit

Cons:

• Potentially higher interest rates
• It may require personal guarantees or collateral
• Shorter repayment terms

Requirements:

• At least one year in business
• Minimum annual revenue (varies by lender)
• A credit score of 600 or higher (varies by lender)

Invoice Factoring

Invoice factoring involves selling your outstanding invoices to a factoring company at a discount in exchange for immediate cash, helping businesses with cash flow issues.

Example:

You have an invoice for $50,000, and you need money urgently. Now you can sell this debt for less than the invoice, say $45,000 or $4800 for quick cash. However, this financing method will not benefit you in the long run.

Loan amount: Depends on the value of outstanding invoices.

Pros:

• Quick access to cash
• No collateral required

Cons:

• money-losing
• Not a long-term financing solution

Business Credit Card

Business credit cards offer a revolving line of credit, allowing businesses to borrow funds as needed and repay them with interest.

While the interest rates may not be the most favorable, these cards provide maximum flexibility for using as working capital.

Loan amount: Credit limits vary depending on the card issuer and the business's creditworthiness.

Pros:

• Higher credit limits than consumer cards.
• Flexible short-term cash flow.
• Easy to track employee expenses.
• Earn rewards/cash back on business spending.
• Simplifies business expense tracking for tax purposes.
• Better expense management with multiple tools.
• Using a business credit card is a smart method to establish a favorable credit history, which can lead to better financing options from other lenders in the future.

Cons:

• Good or excellent credit is needed.
• Risk of unmanageable debt.
• High-interest charges for unpaid balances.
• Detailed business information is required.

Requirements:

• Good personal and business credit scores
• Business name and contact information
• Time in business
• Number of employees: Don’t count yourself.
• Business category and type
• Business structure
• Federal tax ID
• Business revenue and expenses
• Personal information: Name, Date of birth, Social Security number, Address, email and phone number, Annual income (include all income, not just what you derive from your business).

FAQs about PPP Loans Availability

What Was the Total Amount of Funding for the Paycheck Protection Program Loans?

The Paycheck Protection Program (PPP) loans received total funding of $943 billion through three separate acts. Initially, the CARES Act allocated $349 billion, followed by an additional $310 billion from the PPP and Health Care Enhancement Act, and finally, $284 billion from the Consolidated Appropriations Act (CAA).

Q: Can I Still Apply for Ppp Loan Forgiveness?

Q: Is it possible to apply for loan forgiveness for a PPP loan that has been received?

A: Yes, if you received a PPP loan, you can apply for loan forgiveness by following the guidelines and requirements provided by the SBA and your lender.

Q: Are There Any Alternative Funding Options for Small Businesses?

A: Various alternative funding options are available for small businesses, including SBA loans, online lenders, invoice factoring, and business credit cards. Researching and evaluating these options is essential to determine which one best suits your business needs.

Q: Can We Expect Another Round of Ppp Loans in the Future?

A: The future of the PPP is uncertain, and there are no guarantees that additional rounds will be provided. It is crucial to stay informed on the latest government policies and programs to ensure you are aware of any new financial assistance opportunities for your business.

Q: Where Can I Get Additional Details About Ppp Loans and Other Financial Aid?

A: For the most up-to-date information on PPP loans and other financial assistance programs, visit the SBA website (www.sba.gov) and consult your lender or financial advisor. They can guide the best funding options for your business.