Here's what small business owners need to know before the application window opens on Wednesday. 1. Businesses can apply for either a first or second draw of funds If you are self-employed or own a business with fewer than 20 employees, lenders will prioritize your PPP loan applications starting Wednesday. Eligible businesses can apply for either a first or second draw PPP loan, depending on their individual circumstances. To qualify for the second round of forgivable loans from the SBA, businesses must have spent or plan to spend all of their first loan and show they had a 25% or more drop in revenue in any quarter of 2020.2. The self-employed can now get more forgivable funding One of the biggest changes to PPP is how lenders will calculate loans for millions of self-employed workers, including sole proprietors and independent contractors. For businesses with employees, PPP loans are generally 2.5 times payroll costs. But for one-person firms that don't have a payroll, lenders used the net profit number from the IRS 1040 Schedule C, which includes deductions. Because of this, some workers saw very low loan amounts in previous rounds of the program. To fix the issue, the SBA is revising the formula to match what it uses for farmers. This basically means that they will instead calculate loan amounts from gross income instead of net profit, said Chris Hurn, chief executive of Fountainhead Commercial Capital. "It makes tremendous sense," said Hurn, adding that it will get needed money out to people faster. 3. Apply as soon as possible Experts aren't sure if two weeks will be enough for all the smallest businesses that need help to apply for PPP loans, and since there is a limited amount of funding available, businesses should apply as soon as possible. If you'd like to apply, this means that you should gather your tax documents including Schedule C – either from 2019 or 2020 – and have them ready to submit on Wednesday. It may also be a good idea to get in touch with a lender in your community or one that you have an existing relationship with to submit your paperwork. In addition, if you're able to apply for a first round PPP loan right away, there's possibly time to allocate the money and apply for a second draw, according to Hurn.
1. Businesses can apply for either a first or second draw of funds If you are self-employed or own a business with fewer than 20 employees, lenders will prioritize your PPP loan applications starting Wednesday. Eligible businesses can apply for either a first or second draw PPP loan, depending on their individual circumstances. To qualify for the second round of forgivable loans from the SBA, businesses must have spent or plan to spend all of their first loan and show they had a 25% or more drop in revenue in any quarter of 2020. 2. The self-employed can now get more forgivable funding One of the biggest changes to PPP is how lenders will calculate loans for millions of self-employed workers, including sole proprietors and independent contractors. For businesses with employees, PPP loans are generally 2.5 times payroll costs. But for one-person firms that don't have a payroll, lenders used the net profit number from the IRS 1040 Schedule C, which includes deductions. Because of this, some workers saw very low loan amounts in previous rounds of the program. To fix the issue, the SBA is revising the formula to match what it uses for farmers. This basically means that they will instead calculate loan amounts from gross income instead of net profit, said Chris Hurn, chief executive of Fountainhead Commercial Capital. "It makes tremendous sense," said Hurn, adding that it will get needed money out to people faster. 3. Apply as soon as possible Experts aren't sure if two weeks will be enough for all the smallest businesses that need help to apply for PPP loans, and since there is a limited amount of funding available, businesses should apply as soon as possible. If you'd like to apply, this means that you should gather your tax documents including Schedule C – either from 2019 or 2020 – and have them ready to submit on Wednesday. It may also be a good idea to get in touch with a lender in your community or one that you have an existing relationship with to submit your paperwork. In addition, if you're able to apply for a first round PPP loan right away, there's possibly time to allocate the money and apply for a second draw, according to Hurn.