PPP Loans Still Available for Self-Employed and Small Businesses, But Time is Running Out

The Paycheck Protection Program (PPP) has approved more than $520 billion for American businesses and self-employed individuals, but with the May 31st application deadline quickly approaching1, the program still has billions of dollars to disburse. Whether you own a small business, non-profit, or you’re self employed, the PPP’s forgivable loans can be enormously helpful. However, it’s important to learn as much as possible about the program — and evaluate lenders thoroughly using online resources.

PPP Eligibility: What Many Americans Don’t Understand

Paycheck Protection Program loans don’t function like typical government loans. For many applicants, the most important difference is that PPP loans may be forgivable — which means that borrowers don’t need to pay them back.

The Small Business Administration, which approves the loans, has simplified the process for applying for forgiveness, and many smaller loans can be forgiven within months of using their funds.

Here are the basics: Businesses that use PPP funds for payroll (or other eligible expenses) can typically receive forgiveness, provided that they maintain their staff and don’t cut employee wages by more than 25 percent. Applicants must show that they lost income during the COVID-19 pandemic, though the SBA doesn’t require businesses to prove that the losses were actually caused by the pandemic.

When the program launched, the U.S. government provided minimal guidance — which was understandable at the time. However, the SBA has clarified instructions for PPP loans in the last few months. Some important takeaways:

• Self-employed people can get PPP loans. The Biden administration changed the rules for self-employed individuals and businesses with fewer than 20 employees. That may increase the available aid for extremely small and self-run businesses.
• Second-draw PPP loans are still available. If you’ve already used the funds from a PPP loan, you may be able to apply for a second loan. Second-draw PPP loans have the same basic terms as initial draws — so if your business lost money during the pandemic, applying for two PPP disbursements may be a savvy move.
• The SBA has improved processing for smaller applicants. Initially, the program was hampered by automated fraud checks, which left many small businesses frustrated. That has changed, and most qualified applicants can now finish their PPP applications — and receive their funds — within weeks.
• Time is running out. The official deadline for applying for a PPP loan is May 31st, but lenders won’t accept applications after all of the funds have been exhausted.

In other words, if you run a small business, you’re self employed, or you meet the other criteria for a PPP loan, the clock is ticking. The good news: Many lenders offer online portals to streamline the application process. By using these resources, you can determine whether you qualify — and receive a significant amount via a forgivable loan.

Evaluating Lenders and Applying for a PPP

While any SBA-approved lender can help you fill out a PPP application and receive your funds, you should still research carefully before making a decision. Here are some tips and facts to keep in mind:

• Look for a lender that specializes in PPP or SBA loans. Make sure you’re comfortable with the lender; look closely at their websites to learn more about the application process.
• Applying for a PPP is free. Lenders make money off of PPP loans through processing fees paid by the federal government. The borrower doesn’t pay any part of these fees — so there’s typically no cost to submit an application, regardless of whether it’s approved.
• Keep documentation. When you receive your funds, keep detailed records about how they’re used, particularly if you’re covering expenses other than payroll. These records will simplify the forgiveness process.

Borrowers should review at least 3-4 websites, paying attention to the lender’s reputation, capabilities, and experience.

Finding a PPP Loan Before the May 31, 2021 Deadline

The average PPP loan size is $107,000, and the maximum loan amount is $10 million. The SBA has already forgiven more than 30 percent of approved loans — and in the small percentage of cases where loans aren’t forgiven, borrowers repay them at a low 1 percent interest rate.

The Paycheck Protection Program is one of the most aggressive and well-funded loan programs in American history, and to date, more than 700,000 businesses have applied. Loans are available to businesses with no employees, cooperatives, and self-employed individuals, and lenders have worked to make the application process easy.

Even so, the program currently has billions of dollars in unspent funds, and the final application deadline is approaching quickly. By researching at least 3-4 lenders, you can avoid leaving money on the table — and get the funds you need to maintain your business in unprecedented times.