Enacted in 2020 as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Paycheck Protection Program (PPP) was meant to help keep small businesses afloat despite the challenges of the COVID-19 pandemic. The CARES Act made a whopping $349 billion in forgivable small business loans available to businesses with 500 employees or fewer, provided that they met industry-specific staffing or revenue standards. Additional contributions to the program came from the PPP and Health Care Enhancement Act and Consolidated Appropriations Act (CAA)—$310 billion and $284 billion, respectively.
Some of these businesses were also eligible for a Second Draw PPP loan, and many borrowers also qualified for PPP loan forgiveness. Countless small businesses that missed these opportunities found themselves wondering, “Is there a 3rd round of PPP coming?” There was, in fact, a third round of funding (already) made available, but the program has since come to a close.
Let’s address some of the common questions that we still hear about PPP small business loans, and offer some alternative financing solutions for your consideration.
Unfortunately, the Paycheck Protection Program (PPP) elements discussed above came to an end on May 31, 2021.
Many borrowers qualified for full PPP loan forgiveness. First- and second-round PPP borrowers qualified for loan forgiveness as long as throughout the covered period following loan disbursement (8-24 weeks):
They maintained steady employee and compensation levels.
They applied the loan’s funds to eligible expenses, such as payroll costs.
They allocated at least 60% of the total proceeds on payroll costs.
Data compiled by the Pandemic Response Accountability Committee shows that as of late 2022, at least 11.5 million small businesses were able to have their loans forgiven, coming to a staggering total of $755 billion in “forgiven” funds.
No, these loans are not being automatically forgiven. That being said, as long as you’ve used the funds in an appropriate manner that conforms to the program’s standards, the process for applying for loan forgiveness is/was relatively straightforward.
So, how do PPP loans get forgiven, and can you still apply for PPP loan forgiveness? If you received a PPP loan, your deadline for applying to have it forgiven coincides with the maturity date on the loan. Additionally, the SBA advises that borrowers need to apply for loan forgiveness within 10 months of the covered period’s end, or else their payments would no longer be deferred and payments would need to be started toward repaying the loan. Learn more about PPP loan forgiveness.
Just because you may have missed the opportunity to apply for a PPP loan over the course of the pandemic, that doesn’t mean you’re out of luck if your small business needs funding.
For example, the United States Small Business Administration (SBA) offers three compelling loan types your small business may qualify for.
SBA 7(a) loans can be short- or long-term loans worth up to $5 million. They can be used to increase short- or long-term working capital, buy equipment or inventory, refinance or consolidate existing debt, and more. Because these funds can be used for such a wide variety of business purposes, they represent the most common SBA loan type for small businesses. Learn more about how to qualify and apply for SBA 7(a) loans here.
SBA 504 loans are long-term, fixed-rate loans, similarly available for up to $5 million. These loans are meant for “major fixed assets that promote business growth and job creation,” such as purchasing—or making improvements to—assets like buildings, real estate, and equipment. They can’t be used for working capital, inventory, or debt consolidation, however. Learn more about how to qualify and apply for SBA 504 loans here.
SBA Microloans max out at $50,000, with the average microloan amounting to around $13,000. and are processed through SBA funding intermediaries. They’re meant “to help small businesses and certain not-for-profit childcare centers start up and expand.” While microloans aren’t appropriate for purchasing real estate or refinancing existing debts, they can be used as working capital or to purchase assets such as inventory or equipment. Learn more about how to qualify and apply for SBA microloans here.
In addition to the versatile loan types offered through the SBA, you may be able to secure the financing you need through grants, outside investors, or other avenues.
For many small businesses, these alternatives may even be preferable to PPP funding or SBA loans. Securing financing through a bank loan, for example, is typically limited to long-term loans with fixed repayment terms. From a logistical or practical perspective, then, these loans may not be as tantalizing as they seem. In these cases, you might consider applying for a business line of credit.
Backd offers borrower-friendly business lines of credit that are appropriate for businesses whose needs aren’t met by the SBA’s offerings. A business line of credit provides much more versatility and flexibility than a traditional bank loan, providing small businesses with instant access to revolving credit with competitive rates and terms. Additionally:
No collateral is required to apply for a business line of credit through Backd.
Flexible term lengths are available, up to 16 months.
Credit amounts can range from $10,000 to $750,000.
You can draw funds at any time, and use them how you want.
Learn more about Backd’s line of credit options for small businesses, or apply in 3 minutes today. The application is obligation-free and will not affect your credit score.