Important Things You Need to Know
On January 6, 2021, the Small Business Administration (SBA) issued new guidance on which businesses are eligible and how to apply for the new round of Paycheck Protection Program (PPP) funds authorized in the new Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (Economic Aid Act) signed into law on December 27, 2020.
The main takeaway is that any business that did not receive a PPP loan previously, or those businesses that experienced a 25% reduction in revenue in one quarter of 2020 over 2019, can apply for this new round of PPP. Even more helpful, businesses, sole proprietors, and independent contractors applying for loans of $150,000 or less and based on the same calculation as round one—2.5 times one month of 2019 payroll—do not have to submit new documentation if applying through the same lender. The new regulations do give lenders the ability to request additional documentation from borrowers if they deem it necessary.
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These borrowers of less than $150,000, however, have to document the reduction in revenue upon applying for forgiveness. The new program will open as soon as lenders can reestablish the process, and it expires on March 31, 2021.
Borrowers of loans in excess of $150,000 will have to document their reduction in gross receipts upon applying for round two of PPP. The simplest method to do so, according to the regulations, is to submit 2020 and 2019 tax returns if available. If not, quarterly financial or bank statements may suffice.
Unlike the first round of PPP, however, while the method of calculating the new loans is the same, the new loans are capped at $2 million. In addition, while first-time borrowers can have 500 or fewer employees as in round one of PPP, second-time applicants can only have a maximum of 300 employees.